The German government is considering temporarily suspending the laws requiring companies to declare bankruptcy, amid a surge in insolvency procedures by a number of major companies, as well as smaller companies. According to data from the IWH Economic Institute, last August there was a 26% jump in the number of companies that announced bankruptcy, compared to August last year. Experts explained that the background to the move is mainly high energy costs, and a fear among businesses of a further increase in gas and electricity prices.
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The “Hakala” paper company, a leading shoe manufacturer, as well as a vehicle parts supply company in Germany announced bankruptcy in the last two weeks. The Producer Price Index (PPI) data published today in Germany was a negative surprise, showing that prices rose by 46% in August (compared to last year), which should be passed on to consumers throughout Europe, suppressing production in the country. Most of the increase is explained by energy prices.
A wave of bankruptcies was also recorded in the UK last August, but this is mainly explained by the expiration of government rescue and aid programs launched during the Corona period. The number of companies that went bankrupt in England and Wales was 42% higher than the number in August before the pandemic.
Most of the support programs expired last March, when the number of bankrupt companies stood at 2,120. But even last August, the number of bankrupt companies remained high, at 1,933. The British government has not yet presented an energy support package for industry and small businesses. Pubs and restaurants in particular, as well as other shops, warned that they would not be able to cope with the soaring prices and would prefer to close their doors.