A sharp rise in business failures reflecting geographical and sectoral differences
In Q2-2023, the number of business failures once again exceeded the level recorded in 2019 (13,358 insolvencies) and it is unlikely that the situation will improve in the coming months given the relative deterioration in the economic environment, the impact of inflation (rapid rise in interest rates, pressure on profit margins, and changes in household consumption behavior) and the repayment of so-called “Covid debts.”
SMEs and mid-sized companies are the most affected with twice as many defaults as in 2019, suggesting that the economic impact of business failures (notably in terms of employment) will be as severe as in 2015-2016. This represents a major warning signal for the French productive fabric in general.
Some regions (Aquitaine and Poitou-Charentes, especially) and industrial sectors are particularly hard hit: agriculture, agri-food, road haulage, IT services and software publishing. Companies working directly with end consumers seem to be suffering more (agri-food, hairdressing, body care, leisure, etc.) owing to the impact of higher inflation and related changes in consumer behavior. In contrast, however, the construction sector is currently holding up well despite difficulties in the real estate market.
The increase in business failures is expected to continue over the next 18 months
The current high proportion of liquidations and SMEs and mid-sized companies in situations of default suggests that the economic impact of insolvencies (notably in terms of employment) will be as severe as it was in 2015-2016.
In 2023 – and probably in 2024, too – the fact that the URSSAF bodies responsible for collecting employee and employer social security contributions will be taking punitive measures against companies (more frequently small ones) weakened by the Covid crisis and companies exposed to inflationary shocks (rising energy costs, falling household consumption, etc.) will add to the ‘natural’ number of insolvencies. As a result, the number of business failures is expected to rise sharply (to 55,000 in 2023 and, subsequently, to 58,000 in 2024), without returning to the high levels observed in the wake of the financial crisis (see Conjoncture Entreprises – July 2023). (Cf. Conjoncture Entreprises - juillet 2023).