German economy institute expects around 25,800 businesses to go bankrupt in Germany by the end of the year, according to a study published on Wednesday. This would mark a fourth consecutive year of increasing insolvencies, with the number likely to nearly double compared to 2021, the institute said. The trend is not expected to end soon.
The study’s background is the crises of the past few years, which have heavily hit the German economy. The COVID-19 pandemic marked the beginning of the trend of increasing insolvencies, with the number of companies filing for insolvency declining year by year before the pandemic. During the pandemic, the obligation to file for insolvency was suspended, but after the Russian invasion of Ukraine in February 2022, energy prices skyrocketed and the subsequent recession years put a lot of pressure on businesses.
Not every insolvency is a problem: business failures can be normal, as not all business models are sustainable in the long run. The institute emphasizes that it is crucial for the government to not put obstacles in the way of start-ups, but to promote innovation instead. “The new federal government must turn the tide, boost the economy and make Germany an attractive location for businesses again” said the study’s author, Klaus-Heiner Röhl. The out-of-control bureaucracy, a worn-out infrastructure and the shortage of skilled workers are hindering new start-ups and driving insolvencies further up.