162 companies were declared bankrupt between July and September 2023. That was 3% higher than in the same period in 2022, the national statistics bureau Statec and justice ministry said on Wednesday. Looking at the first nine months of the year, there were 710 bankruptcies (up 9% year-on-year).
Their impact is growing. These bankruptcies have led to the loss of 1,943 salaried jobs since the start of the 2023, compared with 1,297 in the first nine months of 2022. 141 bankruptcies in the first three quarters were in commerce (up 8%), with 250 jobs affected (up 57%). 117 were in construction (up 58%), with more than 700 job losses (up 41%). And 80 were reported in the hotel and catering sector (up 23%), with 300 fewer jobs (up 78%).
Bankruptcy is when a company can no longer pay its debts or meet its commitments. The number of bankruptcies is calculated as the sum of openings and re-openings, minus bankruptcies reported by the courts. Liquidation follows a procedure to cease trading or the dissolution of a company, which can take place after a bankruptcy, for example. Here, the figures are down. Statec reported 30 liquidations in the third quarter of 2023, compared with 81 in the same period of 2022. Comparing the first nine months of the year, the figure is -23%. More than 60% of the companies liquidated were holding companies and investment funds. The statistics agency pointed out that these are provisional figures.
10% more bankruptcies worldwide in 2024, +3.4% in Luxembourg
There was no wave of bankruptcies expected in 2020, 2021 or 2022, despite the series of crises (covid, war in Ukraine, inflation, etc.). The initial figures for 2023 remain mixed, with a slight rise in bankruptcies and a fall in liquidations, even though the number of jobs affected is increasing.
What next? In its global outlook, also published on Wednesday, the insurer Allianz predicted a 10% increase in bankruptcies worldwide in 2024, after +6% in 2023 and +1% in 2022. “The decline in business sales is accelerating as a result of the slowdown in demand, but also of the decline in companies’ ability to impose their selling prices”, the firm stated. “This situation, combined with persistently high costs, is weighing on profitability. As a result, liquidity positions are deteriorating rapidly and are not expected to improve before 2025.” Allianz estimated that by the end of 2024, bankruptcies will have returned to pre-pandemic levels in three out of five countries.
But not in Luxembourg. Allianz forecast 1,180 bankruptcies in 2023 (+15% in one year and -4.2% compared with 2019), 1,220 in 2024 (+3.4% in one year, -1% compared with 2019) and 1,160 in 2025 (-5% in one year, -5.8% compared with 2019).
Luxembourg seems to be faring better than others, remaining below its pre-pandemic levels. “I assume that the state aid has paid off,” commented Juan Santiago, a manager at the credit and collection agency Creditreform. He also hopes that the new government will “provide further support for businesses to combat the property crisis”. Even so, “despite all the measures that will be taken, it will be practically impossible to help everyone”. Allianz’s projections for Luxembourg show an “average of 1,190 bankruptcies per year” in 2024 and 2025, he calculated. This corresponds to “the average since 2018”.
To draw up its predictions, Allianz explained that it uses an “econometric approach with macroeconomic variables” and a classification model based on “thousands of series of macro-financial data”, as well as refining the data by Allianz Trade’s local experts on a country-by-country basis. More specifically, what variables and data are we talking about for Luxembourg? The insurer stated: “Unfortunately, we cannot give you any further details about our methodology”.
Originally published in French by Paperjam and translated for Delano