End of Covid aid, energy crisis… the great fear of bankruptcy for companies

End of Covid aid, energy crisis... the great fear of bankruptcy for companies

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After a record GDP rise in 2021, inflation is precipitating a backlash in 2022 for companies whose default rate rose 23.1% year-on-year in July. The most in trouble are the companies with less than 20 employees that combine the return of the PGE and the energy crisis. Once again, the state is called to the rescue.

There are two ways of looking at economics: glass half empty or glass half full. From official sources, it’s fair game, it’s not all that bad. GDP saw record growth in 2021 with an increase of 7%. And the number of company bankruptcies (you understand, bankruptcies) remained just above 3,000 in July 2022, “as in the whole world since the beginning of the year”, notes the Banque de France, which observes 34,653 bankruptcies in a year , a decrease of 32.2% compared to 2019, before the start of the health crisis.

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TESTIMONIES. Small and medium-sized companies in difficulty: “A year later, we have our heads in the soup again”

Long live “whatever it takes”! It is not so simple. In the first place, because the figures are biased by the slowdown in the activity of the commercial courts in 2020 and 2021, after the temporary modification of the dates of declaration of suspension of payments and of the cash support measures, measures that they cost 80,000 million euros (1) to the State, recalled Bruno Le Maire a few days ago.

Free Midi Infographics.

Added to this are the 160,000 million euros granted by banks through state-guaranteed loans (PGE), loans that the vast majority of companies have begun to repay. An additional burden sometimes difficult to assume by companies that, in 2020, had not foreseen the rises in prices of energy and other essential raw materials for their activity that would occur two years later.

The ones that have the most difficulties are these so-called “zombie” companies, supported with public money when they were already fragile before the crisis. Its lifespan was artificially extended by two years. But they were the first to knock on the door of the commercial courts in the second half of 2021, hence the 23.1% increase in company bankruptcies between July 2021 and July 2022.

“An Additional Hurdle from 2023”

And this is just the beginning, warns Jocelyne Marti, deputy general manager of Delubac et Cie bank, which specializes in supporting bankrupt companies. “Failure indicators are collected and the time is with concern for companies. End of government aid and the policy of whatever it takes, increase in the price of energy, increase in the cost of raw materials…
Therefore, all factors will lead to a certain number of business failures in all sectors. The State supported the companies through the PGE until June 2022. And all the banks voluntarily joined this effort despite this, he recalls. Unfortunately, when the machine stops producing real wealth, it saves face by flooding economic actors with fictitious liquidity without counterpart, but this liquidity will have to be repaid. An additional obstacle for companies from 2023”, according to Jocelyne Marti.

Especially for those who have a strong need for electricity, such as restaurants, automotive, factories that can no longer run their ovens…

Already, for these sectors, this is reflected in increases in failures well above the average: +111% in a year in restoration from July 2021, +100% for bakeries, +87% for beverage establishments, +86% for hairdressing and beauty salons. institutes, +40% in the plastering sector… This explains why “the average increase in bankruptcies in companies with less than 10 workers is not 23.1% but 44.4% in the last 12 months”, recalls Marc Sánchez, general secretary of the Independents union, these small companies that support 6 million employees and small bosses in France. And for him, that’s just the tip of the iceberg.

“The Banque de France does not count the voluntary cessation of activity, which went from 102,052 in 2019 to 183,376 in 2021. That is +80% in two years. No, we cannot consider that the situation is improving. We must help ourselves. ” One more time.

(1) The amount of subsidies granted to companies is broken down as follows: 35,000 million euros for the solidarity fund, 35,000 million for partial activity and 10,000 million for fee exemptions.

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