Global bankruptcies exceed 2008 level – FT

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The world’s corporate sector has been slammed by a wave of bankruptcies at a double-digit rate not seen in decades, according to figures from national statistics offices cited by the Financial Times on Monday.

Business insolvencies in the United States surged by 30% year on year in the year to September, while in Germany, the EU’s largest economy, the number of recorded bankruptcies increased by 25% from January to September compared to the same time last year.

The number of companies declaring bankrupt in the EU increased 13% year on year in the nine months to September, reaching an eight-year high.

In October, France, the Netherlands and Japan saw the number of bankruptcies rising by more than 30% versus the same month a year ago. The OECD group of mostly wealthy states has recently reported that in some member states, including Nordic nations Denmark, Sweden and Finland, bankruptcy rates have exceeded levels reached during the 2008 global financial crisis.

Insolvencies in England and Wales also reached their highest level since 2009 between January and September of this year.

Higher key rates, as well as self-liquidation of so-called zombie enterprises, which had survived the Covid era only because to government support, have fueled the trend, according to Neil Shearing, chief economist at Capital Economics.

Massive government assistance programmes for businesses and households during the pandemic have already been substantially phased out, while central banks have frequently raised interest rates in a bid to curb spiralling inflation.

The trend is projected to continue, as many businesses will have to refinance debt at higher rates in the coming months, even if central banks’ rates remain unchanged.