In 2022, the number of bankruptcies increased compared to 2021. However, a NZZ data analysis shows that fewer companies are currently insolvent than before the Corona crisis. There are large “bankruptcy gaps” in retail and hospitality in particular.
There are far fewer bankruptcies in gastronomy than feared at the beginning of the Corona crisis.
“The wave of bankruptcies hit Switzerland with full force.” That’s what they called it «Handelszeitung» In early July, based on an analysis by the Economic Information Service credit reform. In September, the media doubled down. The news portal Well announced: “Because of inflation & Co.: Swiss bankruptcy wave continues”. The basis here was also a communication from Creditreform, according to which the number of Company bankruptcies significantly above the previous year’s level lie.
Comparison with pre-crisis level is decisive
The drastic increase in the number of bankruptcies was mainly due to the fact that only 2021 was used as the year of comparison. It was only mentioned in passing that the picture is put into perspective in each case if you compare the latest figures with the years before the Corona crisis.
The NZZ has therefore evaluated all commercial register entries for the liquidation of companies due to bankruptcy since 2017. To compare them to the new figures, we use average values from 2017 to 2019.
A bankruptcy is opened when a company can no longer repay its debts. During the Corona crisis, the federal government and the cantons did a lot to prevent restaurants and small service companies from getting into payment difficulties due to protective measures and forced closures. According to the Federal Department of Finance, since March 2020 more than 35 000 companies supported with hardship aids.
In addition, there was a simplified procedure for registering short-time work. The self-employed were compensated for loss of earnings. In the initial phase of the pandemic, the Federal Council also relieved certain companies of the obligation to notify the bankruptcy court immediately in the event of over-indebtedness (Obligation to report overindebtedness). This gave the companies the opportunity to continue operations despite large losses in sales.
These measures meant that significantly fewer companies became insolvent during the Corona crisis than would have been expected, which is why 2020 and 2021 are not suitable as comparison years. After the end of the first lockdown, an analysis by the NZZ showed that the Federal Council’s rescue plan was apparently having an effect: the number of bankruptcies and liquidations had collapsed during the lockdown. After shops and restaurants were able to open again, the number quickly reached the previous year’s level, but did not explode.
The evaluation of the new data shows that the number of company bankruptcies was only above the corresponding average values for the years 2017 to 2019 in the months of May, June and September 2022. In October, however, the supposed “wave of bankruptcies” vanished into thin air. There were about 6 percent fewer company liquidations due to bankruptcy than the average of the three years before the crisis.
In total, more than 4700 companies have become insolvent in 2022, which is the same number as in the months of January to October in the years 2017 to 2019, so the bankruptcy situation has completely normalized. The effect of the Corona years before was considerable: In 2020 and 2021, 19 and 15 percent fewer companies were dissolved due to bankruptcy than in the years before.
The decline during the Corona years was so severe that there is currently a large “bankruptcy gap”. So companies are still active in the market that would normally have become insolvent long ago. Accordingly, it is possible that some insolvencies will still be “rescheduled”, especially since they are still insolvency around 97,000 Covid-19 loans run, which will eventually be due.
Fewer bankruptcies in gastronomy, hotels and retail
The number of bankruptcies rose most significantly in 2022 in the media and telecommunications industry, in real estate and housing and in services. While companies in the first two sectors were able to work normally during the corona lockdowns, numerous service companies such as hairdressing salons had to close at least for a short time.
In the service sector, the number of bankruptcies in the first Corona year had decreased by more than 20 percent compared to previous years, and in 2021 it then fell by 6 percent. With this year’s surge, the bankruptcy gap in this industry has largely closed.
The catering and hotel industry as well as trade were hit hardest by the corona protection measures. Conversely, however, these sectors also benefit most from government aid benefits. As a result, the number of bankruptcies fell by 23 (gastronomy and hotel industry) and 21 percent (retail) in 2020 compared to the years before the crisis. Unlike services, the two industries saw another slight decline in bankruptcies in 2022. Business seems to have been going well this year, although Gastrosuisse had repeatedly warned that numerous businesses would have to close forever due to the Corona measures.
There are also some regional differences: In the Zurich and Espace Mittelland regions, there was a slight increase in the number of bankruptcies this year compared to the pre-crisis level. The increase was more pronounced in Central Switzerland, Ticino and Northwestern Switzerland. In the Lake Geneva region and in eastern Switzerland, on the other hand, significantly fewer companies went bankrupt this year than in 2017 and 2019.
When interpreting this, however, it must be taken into account that the number of bankruptcies in all regions was exceptionally low in 2020 and 2021, so that an increase in this year overall does not result in more bankruptcies than for the period from 2020 onwards would have been expected.
One Study by the Statistical Office of the Canton of Zurich calculated the bankruptcy gap for all major Swiss regions. According to this, fewer companies have gone bankrupt almost everywhere since the beginning of the crisis than before the crisis. Only in Central Switzerland has the gap now closed, but in Eastern Switzerland it continues to widen. The study comes to the conclusion that an alleged wave of bankruptcies for the canton of Zurich cannot be statistically confirmed.
Effects of the energy crisis still unclear
In recent months, the looming electricity and gas shortages and skyrocketing energy prices have replaced Corona as the dominant crisis topic. The threat situation for companies is different than during the lockdowns and is likely to result from the increased costs associated with lower demand. It is still unclear how the energy crisis will affect the bankruptcy figures in the coming months.
Although consumer sentiment has also bottomed out in Switzerland, it is likely to come through the crisis better economically than other European countries. The forecasts currently assume only a slowdown in growth, but do not anticipate a recession. So at the moment it doesn’t look like the big wave of bankruptcies will start rolling after all.
The bankruptcy data comes from the data interface of the Central company indexit (zefix). The individual reports were aggregated monthly. The industry information comes from the economic information service Moneyhouse. Data on the daily number of bankruptcies for Switzerland and the canton of Zurich is also available at Statistical Office of the Canton of Zurich.
Businesses can also register through a liquidation dissolve themselves, or they can be dissolved by a court because of deficiencies in the organization. In this article, however, we focus on bankruptcies, since it is clear that the company concerned is in payment difficulties.