Corporate insolvencies rise sharply: Cause for concern or normalization after the pandemic years?

The sluggish German economy, which has now been in a mild recession for two years, the rise in interest rates following a prolonged period of zero interest rates, the normalization of insolvency notifications after the suspension of the obligation to file during the pandemic and structural problems in the difficult transformation of the German economy towards CO2-neutrality, especially in the manufacturing sector, overlap as drivers of this negative trend in corporate insolvencies. Nevertheless, at 24,600 cases in 2024, the number of insolvencies is only expected to be roughly the same as in 2015, while over 39,000 company bankruptcies were recorded in the 2003 crisis. In 2025, the figure could rise by 15 per cent to around 25,800 insolvencies. After two “lost years”, the economic trend is becoming increasingly relevant for the further course of insolvencies, as the post-pandemic normalization and adjustment to the higher interest rate level should now be completed.  

The geopolitical upheavals in the global economy persist. A geo-economic bloc is becoming more entrenched and this is having a negative impact on the export activities of German companies. Adverse economic factors are overlapping with a tangible structural crisis in Germany. For some years now, it has become apparent that German exports are responding less and less to an upturn in the global economy, which underlines the country's declining competitiveness. Consumers and investors remain in cautionary mode due to high levels of uncertainty and are holding back on private spending. This is manifested on the one hand in an increased household savings rate and on the other hand in the sharp drop in corporate investment levels since the pandemic. In the domestic economy, the unfavorable demographic trend, the very high tax burdens in international comparison and the high level of economic policy intervention in the context of the transformation are leading to reduced investment and weak growth, which is causing insolvencies to rise.