“The number of bankruptcies will increase in 2023,” according to credit analyst Creditreform. Archive photo: Matic Zorman / Maison Moderne

“The number of bankruptcies will increase in 2023,” according to credit analyst Creditreform. Archive photo: Matic Zorman / Maison Moderne

In the first half of 2023, Luxembourg witnessed a rise in bankruptcy filings, with 560 companies seeking financial relief, a year-on-year increase of 10%, according to Creditreform.

There were 560 corporate bankruptcies during the first six months of 2023, compared to 511 during the same period last year.

However, the current figure remains below the historical average, indicating that while businesses are experiencing pressure, the overall economic conditions in Luxembourg continue to exhibit resilience.

According to credit ratings and debt collection agency Creditreform, out of the total of 560 bankruptcies, 39% were newly established companies of less than five years, marking a significant surge compared to the previous year’s 22%.

Examining bankruptcies based on district court data, the Luxembourg district recorded 500 cases, indicating an 8% rise from the 463 cases reported in the first half of 2022. In the Diekirch judicial district, there was a notable increase of 29.2%, with 60 proceedings, in contrast to 48 cases in 2022.

The services sector accounted for the highest number of bankruptcies, reaching 328 cases. Although this figure remains significant, it actually represents a decrease compared to the 356 bankruptcy proceedings in H1 2022.

Conversely, the construction sector experienced a substantial rise, reflecting the uncertainties it faces, with a staggering 117% increase to 102 cases in H1 2023 compared to 47 in H1 2022.

Similarly, the trade sector saw an increase with 123 bankruptcies in H1 2023, as opposed to 105 in the previous year.

The manufacturing industry witnessed seven bankruptcies in 2023, up from three the previous year.

Within the services sector, the hotel, restaurant and cafe sub-group experienced a decrease, with 65 cases in H1 2023 compared to 77 in H1 2022. This sector has received state aid and its future developments will determine if the current trend can be sustained, said Creditreform.

While small companies primarily filed for bankruptcy in the first half of 2023, larger entities such as the in Luxembourg and Portolux-Constructions sàrl in Larochette were among the bankrupt companies.

Creditreform predicted that the number of bankruptcies will continue to rise in 2023 due to factors such as energy costs, raw material prices and the increase in interest rates.

Juan Santiago, the authorised manager at Creditreform, pointed out that “despite this significant increase in the first half of 2023, that we are not at the pre-covid crisis level. In 2019 the number showed 628 cases,” reflecting a decrease of 10.5%.

Job losses

Statec, the statistics bureau of Luxembourg, has released indicating that bankruptcies in the first half of 2023 are projected to lead to the termination of 1,338 salaried positions. This represents a significant rise of over 44% when compared to the 927 job losses recorded in the corresponding period of 2022.

Within the overall insolvency-related job losses, the construction sector is anticipated to bear the brunt, accounting for approximately 470 salaried positions, or roughly 35% of the total.