Large companies that fail: last quarter the number doubled (compared to the 2nd quarter of 2019). The graph of major bankruptcies has shown an upward trend since 2017. This trend is accelerating worldwide. This has emerged from research by credit insurer Euler Hermes. “A worrying development. Because large corporations usually drag a large network of suppliers into their trap. And also because the average amount involved in the major bankruptcies is increasingly higher “, says Johan Geeroms, Risk Director at Euler Hermes Netherlands.
Over € 100 billion in turnover
Worldwide, almost 150 large companies (turnover higher than € 50 million) went bankrupt in the second quarter. This represents an increase of +70 companies compared to Q1 2020 (+ 91% q / q) and +73 compared to Q2 last year (+99% y / y). The cumulative sales of insolvent large companies increased to € 106.9 billion (+ 155% q / q and + 138% y / y).
Western Europe shows the largest increase. Geeroms: “It is important that entrepreneurs, also in countries such as the Netherlands and Germany, are aware that the very largest companies can collapse. They mistakenly feel safe doing business with big names. Many large companies survive thanks to free money. in the form of government aid or free loans. But that will end once. “
According to Geeroms, an expanding process of zombification is underway: “More and more companies can no longer keep up their own pants. You can’t see it on the outside, but financially they are on the IV. If governments start to reduce support measures, central banks limit easing and unemployment rises sharply, then I expect a radical shake out of weak brothers. ” Vulnerable sectors, according to Euler Hermes, are transport, retail, automotive, construction, entertainment, catering and business services.
More going on than just corona
According to Geeroms, it is too easy to point to corona alone. “Underlying there is often more going on. This can be a wide range of bottlenecks: from debt and overcapacity to digital disruption and cyclical exposure, from lack of product development to the search for new markets. Corona is exacerbating the problems. once again Brexit, increasing protectionism and the trade war between China and the US. Enough reasons for entrepreneurs to be cautious. “