According to the Banque de France's monthly monitoring report, company failures have begun to climb again in the last 12 months, despite the government's business assistance measures put in place during the health crisis.
The Banque de France demonstrates that "The number of failures continues to catch up with what started in the fall of 2021. Cumulatively over the last twelve months (between June 2022 and May 2023), there have been 47,231 failures against 32,401 a year later, early, and 59,342 on average pre-pandemic." (Source: Banque de France website, Monthly Monitoring of Failures, May 2023) That is an increase of 45.8% compared to May 2022.
Several factors are responsible for this increase, both at the global level with the slowdown in the economy and at the national level with the rise in interest rates and wages, as well as the wage increases granted via inflation. Economic and health crises are not the only ones to blame! The energy crisis weighed heavily on companies in 2023, and the effects of the environmental crisis on working conditions will not reduce these failures. It is interesting to note that the rate of increase in insolvencies slowed in May compared to the previous months but should continue to increase until 2024 before stabilizing.
It remains to be seen how the French economy will evolve and whether the support measures for businesses will be sufficient to mitigate these impacts. But also how companies will deal with these issues to remain competitive and innovative in a world where it is becoming increasingly difficult but necessary to reconcile growth and quality.
Key Figures:
- "45,8 %" Increase in business failures since June 2022.
- "89,3 %" The sharpest rise in insolvencies was among small businesses with 10 to 49 employees.
- "78,8 %" The strongest increase in the hotel-restaurant sector (due to administrative closures and despite massive public aid during the health crisis).
- "56,6 %" The industry also recorded a significant increase in insolvencies, with a rise of compared to the previous year, slightly exceeding the 2019 level.
The rise in the level of insolvencies illustrates the growing financial difficulties of companies in honoring their commitments. Optimal management of customer risk and debt collection is therefore more essential than ever in order to preserve your company's cash flow and profitability and not expose it to late payments and unpaid bills, the main causes of default.