BNR – Eurostat, the EU’s official statistics agency, revealed that business insolvencies in the EU have reached record highs.

The number of companies declaring bankruptcy in Q2 2023 surged by 8.4% compared to Q1. This marks the sixth consecutive quarterly increase in bankruptcies, an unprecedented trend since Eurostat began tracking such data in 2015.

The alarming spike in insolvencies began in Q4 2022, as state support measures implemented during the pandemic ended.

In April 2020, the European Commission allocated over 8 billion euros to provide immediate relief to small and medium-sized businesses throughout the EU.

Challenges in Post-Pandemic Recovery

Although these aid packages initially shielded companies from severe financial crises, their performance has waned dramatically post-pandemic.

The ongoing increase in business bankruptcies and the rising national debts paint a concerning economic future for the EU. However, there is a little positivity in the form of a hike in new business registrations in 2023, the highest in several years.

Sharp Increases in Insolvencies

Among many sectors, the food and accommodation industries have been significantly affected, experiencing a huge 23.9% rise in company insolvencies.

This decline is primarily attributed to the challenges posed by the escalating cost of living crisis. It represents an astonishing 82.5% rise compared to the final quarter before the pandemic restrictions.

The transportation and storage sectors have also witnessed a sharp increase in failing companies, directly impacted by soaring energy prices.

In contrast, only two industry and construction sectors have managed to maintain a lower number of insolvency registrations, according to Eurostat figures.

The persistent surge in business bankruptcies raises concerns about the sustainability of the EU’s economic recovery in the post-pandemic times.

Policymakers face the challenge of mitigating the economic fallout while nurturing an environment conducive to business growth and stability.