Electricity price growth bankrupts hundreds of companies in Germany

Unexpected energy price growth led several hundred companies to bankruptcy in Germany in August, the economic institute warned IWH and banks expect a significantly higher amount of ailing loans in the coming year.

In August, 718 companies declared bankruptcy, a quarter more than last year, and the institute estimates the same growth rate will be registered in September as well.

In October, it may increase to 33 percent if we compare the number of bankruptcys with the same period last year, the institute estimates.

After a long period of small numbers of companies in bankruptcy, the trend has dramatically changed”, Stephen Mueller from IWH said.

The German business association DUI warned of a major “recence”. In a poll conducted among 593 companies, more than a third of them said they were endangered by bankruptcy due to high energy prices. In February, when the war began in Ukraine, 23 percent of them did.

Industry Group V KU also expressed concern, warning that local utility companies are at risk of default due to high energy prices and possible problems in paying customers.

A survey of key credit institutions in August showed that troubled loans in Germany will increase to 37.6 billion euros next year, up from 31.9 billion this year.

Our corporate <x0).Clients did not experience a wave of bankruptcy during the pandemic, said Helmut Schleweis, president of the German Savings Bank Association, at a recent banking conference.

“Today, however, cannot be ruled out anymore, only that the scale (of bankruptcy) can still not be quantified, he stressed.

Christoph Schalast, a professor at Frankfurt Finance and Management School, said the troubled loans did not rise significantly during the pandemic, because the state assisted companies with support programmes.

But the situation has drastically changed. Now we have other factors, such as inflation, supply chain disruptions, war in Ukraine and increased interest rates”, he said.

Some experts warn that figures showing the rise in the number of bankruptcys should not draw wrong conclusions.

They may look bad now because they were artificially reduced during the pandemic, in 2020 and 2021, when the government supported troubled companies for state aid and suspended the law that forced them to file for bankruptcy, they explain.