Bankruptcies expected to rise by 8 percent in 2024

Allianz Commercial has published the 13th edition of the Allianz Risk Barometer, prepared with the insights of more than 3,000 risk management experts from 92 countries. According to the Allianz Trade bankruptcy report included in the Allianz Risk Barometer, following a 1 percent recovery in 2022 and a 7 percent acceleration in 2023, global bankruptcies are expected to rise by 8 percent this year.

The risk survey conducted for the Allianz Risk Barometer involved businesses, Allianz clients, brokers, and industry trade organizations from around the world. The highest number of responses to the Risk Survey came from large-scale companies with annual revenues exceeding 500 million dollars, with 1,340 participants and a 44 percent participation rate.

The report, which also ranks the primary global business risks of concern for this year, lists cyber incidents, business interruption, and natural catastrophes in the top three, respectively. In the list, climate change ranks seventh, while the shortage of skilled labor is in the last place at tenth.

According to the report, bankruptcies will increase by 8 percent globally this year. This marks the third consecutive annual increase in global bankruptcies following a small 1 percent recovery in 2022 and a 7 percent acceleration in 2023.

DETERIORATION NOT EXPECTED TO IMPROVE BEFORE 2025

Emphasizing that rising production costs are negatively impacting corporate profitability, Allianz Trade economists state that the deterioration in liquidity positions is not expected to improve before 2025.

INCREASE EXPECTED IN COMMERCIAL BANKRUPTCIES IN THE US

The report generally notes that because growth is expected to remain low for a longer period, most companies are unable to increase their cash positions through operations.

The report states that the most vulnerable companies and sectors are caught in a difficult position, with the hospitality, transportation, and retail sectors leading the way, and notes that the construction sector is following in their footsteps.

According to the Allianz Trade bankruptcy report within the Allianz Risk Barometer, the normalization of commercial bankruptcies was completed in most developed economies in 2023. In 2023, the US led with a 47 percent increase in bankruptcies, followed by France with 36 percent, the Netherlands with 59 percent, Japan with 35 percent, and South Korea with 41 percent.

Allianz Trade projects that three out of every five countries globally will reach pre-COVID-19 pandemic commercial bankruptcy levels by the end of 2024. This includes many European countries such as Germany, where bankruptcies are projected to rise by 9 percent in 2024, the Netherlands with 28 percent, and the United Kingdom with 5 percent. Commercial bankruptcies in the US are expected to rise by 22 percent this year.

The report states that for bankruptcy figures to stabilize on both sides of the Atlantic, GDP growth would need to double, but this appears unlikely to happen before 2025.