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Coface sees economic risk in rising insolvencies in Western Europe... and Switzerland

Our recent analyses show an increase in insolvencies in Western Europe and, to a lesser extent, in Switzerland. These corporate problems are having an impact on the economy's investment activity, and indicate that an economic recovery in Western Europe is imminent.

Economic Challenges and Forecast Adjustment

At Coface, we have observed an acceleration in corporate insolvencies as part of our recent analyses.

Our Country and Sector Risk Barometer for the third quarter of 2023 highlights that the liquidity positions of companies have contracted, profit margins have deteriorated, and interest costs have risen. This uncertain situation contrasts with the previous economic environment of low receivables and a stable labor market. This has led to private households reducing their savings to sustain their consumption. The resulting decrease in private consumption, in turn, exerts a greater influence on final demand and thus on global growth.

We have adjusted our forecast for global economic growth accordingly. After achieving a growth rate of 2.4 percent compared to the previous year for 2023, we now expect an increase of only 2.2 percent for the upcoming year, 2024.


At Coface, we regularly assess the development of corporate insolvencies, which are incorporated into our risk analysis through the examination of companies' payment behaviors, among other factors. In Switzerland, for instance, we have observed a nearly 14 percent increase in insolvencies during the first three quarters of 2023 when compared to the same period the previous year.

When analyzing specific sectors for the first half of 2023, we observed increases in the majority of industries compared to the previous year. The health and social services sector saw the highest increase, with a 49 percent rise. There was also a significant increase in the hospitality sector, with a 30 percent rise, and in manufacturing, with a 29 percent increase, compared to the previous year.

Austria experienced an 11 percent increase in insolvencies during the first three quarters of 2023. The Netherlands witnessed a 67 percent increase in insolvencies during the first eight months of 2023 and a 21 percent increase overall in 2022 compared to the previous year. The figures are notably high in the UK, where corporate insolvencies grew by 57 percent in 2022 compared to the previous year, with an additional 14 percent increase during the first nine months of this year.

At Coface, we have observed a 23 percent year-on-year increase in insolvencies in Germany as of the second quarter of 2023. Moreover, our survey conducted in Germany in late summer 2023 reveals that we, as Coface, have found that companies hold a very pessimistic outlook on their business prospects.


Outlook and Business Sentiment

Despite challenging conditions, our forecast for global economic growth has been adjusted to 2.2% for 2024, down from 2.4% in 2023. Survey data from Germany reveals a pessimistic outlook among companies, with a significant portion anticipating worse prospects in the coming year.