Insurer Estimates Business Insolvencies Will Rise 15 Percent Next Year

By:
Chris Gaetano
Published Date:
Oct 6, 2021
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While government aid has kept many businesses afloat during the pandemic, the upcoming expiration of many programs has led trade credit insurer Euler Hermes to project that insolvencies will rise by about 15 percent across the globe, CNBC reported.

This will be the first reversal of the trend since the coronavirus first broke on the scene: Insolvencies in 2020 actually dropped by 12 percent, and by the end of this year, that figure is expected to fall by a further 6 percent. So while the prospect of a 15 percent spike is troublesome, it won't completely erase the decline in insolvencies of the previous two years. And what's more, the total will still be 4 percent lower than the rate in 2019, before the lockdowns began. 

But this is only the global average. The rate of insolvency is projected to vary widely from region to region, or even within regions. For example while France and Germany are expected to keep their rates low, Spain and Italy could see insolvencies rising above the 2019 rate as early as the end of this year. The Asia-Pacific region overall is expected to fare poorly, with a projected 18 percent increase, while India is projected to do worst of all, with an anticipated 69 percent surge. 

The United States is expected to keep insolvencies low, due to what the insurer said was strong support for ongoing aid measures, as well as a comparatively powerful economic rebound. 

The insurer said that those nations projected to see a strong rise in insolvencies are those that plan to significantly pull back pandemic aid programs. This echoes warnings last year from the Organization for Economic Cooperation and Development (OECD) that said cutting aid prematurely would have negative impacts on the global economy. 

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