Bankruptcies on the rise in France: +34.6% in the first quarter

The indicators turn red one by one. After the slowdown in the French economy, expected in the first quarter, the outlook for French companies is darkening. Thanks to emergency “at any cost” measures, many industries have been able to take advantage of the months-long inactivity of arbitration courts.

With all these crutches gradually being turned off and the economy worsening due to the war in Ukraine, most economists expect the number of bankruptcies to rise. In this highly uncertain environment, there is a growing fear of stagflation and recession. The consequences of the war in Ukraine could deal a knockout blow to the global economy.” said Oxford Economics economist Daniela Ordonez at a recent press briefing.

“No Territory Spared”

In its latest report released on Monday, April 11, business data research firm Altares recorded a 35% increase in business bankruptcies between January and March compared to the first quarter of 2021. “In the first quarter of 2022, the loop of the health crisis eased and aid ended. A return to normal form, which also implies a resumption of defaults. So growth is starting and it’s already very clear in sectors that rely on renewed consumer habits like going to a restaurant or a hairdresser. This phenomenon does not spare any territory, emphasizes Thierry Millon, director of research at Altares.

The start of the war in Ukraine and its economic impact on the Old Continent could exacerbate hardship for many sectors. “At the start of 2022, confidence in the future was gathering momentum, with cash levels and well-filled order books signaling a recovery in the economy. However, since February 24 and the start of the Russian invasion of Ukraine, the horizon has darkened: skyrocketing energy prices, supply constraints, material shortages, rising inflation packages… so many signals for caution.” he adds. The expert also does not foresee waves of bankruptcies in the coming months. With the second round of presidential elections approaching, scheduled for April 24, this recovery in the first quarter could overshadow the results of outgoing President Emmanuel Macron.

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Growth is still below pre-crisis levels

The number of refusals jumped compared to the first quarter of 2021 from 7,406 to 9,972, an increase of 34% 6%. However, it remains well below pre-pandemic levels recorded in 2018 (14,698 people) and 2019 (14,146 people). It seems that young companies are suffering the most from this bankruptcy movement. Indeed, almost half of the companies that filed for bankruptcy in the first quarter were founded less than five years ago.

Particularly affected were those that were registered immediately before the start of the pandemic or during the sanitary crisis (+52%). “The difficulties of young companies are especially noticeable in “multi-department stores” (mainly grocery stores), where defects were three times higher this quarter, and in the food service sector (+180%), where the number of procedures was exceptionally high. low a year ago, note the authors of the study.

SMEs on the edge

By company size, small and medium-sized enterprises (SMEs) with fewer than 50 employees face much greater challenges than larger ones. Thus, between January and March, the number of bankruptcies jumped by 56% compared to the first quarter of 2021, exceeding the pre-crisis level. On the other hand, companies with more than 50 employees seem to be resisting this surge in bankruptcies.

Retail and restaurants hit hard

Another lesson from this study is that consumer-facing activities are at the forefront. This is mainly trade, public catering and services to the population. In general, in the field of food (+83%) or clothing (+34%), the growth is dizzying.

For catering, such growth is not particularly surprising, given the long months of closing all establishments. Many restaurateurs expressed strong concerns when government aid was cut off. Added to this were a large number of resignations and severe recruitment difficulties from the fall of 2021.