Bankruptcies Are Rising and More Companies Expected Under Pressure (Finans Danmark)

Summary

• The number of bankruptcies has risen recently, partly because of a hump built up during the corona crisis, when bankruptcies were lower than usual.p.1
• Companies are challenged by rising energy and material prices, falling demand and, for some, unpaid corona loans.p.1
• Government aid packages kept companies afloat during the lockdowns, which explains why bankruptcies fell despite the shutdowns.p.2
• Almost 2/3 of bankrupt companies had negative earnings or solvency in their last known annual report before 2022.p.5
• Among bankrupt companies in 2022 with accounts before and during the corona crisis, 29 pct. had problems both before and during the crisis, 22 pct. only during, and 15 pct. went from negative to positive key figures.p.7
• In a survey of the seven largest banks, six of seven expect more inquiries from business customers in the coming winter, and four expect a significant increase.p.8
• Banks see particular challenges in construction, hotels and restaurants and trade, mainly from high energy and input prices that cannot be passed on to customers.p.9

Key insights

1. Bankruptcies in active companies are above the pre-corona level.p.1
2. Zero companies drive the largest fluctuations in the total number of bankruptcies.p.3
3. Only industry has not seen an increase in bankruptcies among the main sectors.p.3
4. Most Danish companies and households entered the energy crisis with strong finances.p.8
5. Five out of seven banks have seen more inquiries from business customers since the summer.p.8
6. Banks see the main challenges among smaller business customers, linked to high energy prices.p.10