Continuous increase in the number of bankruptcies
According to the results of the Coface report, ocular the number of insolvent companies has been increasing continuously since 2016, when it amounted to 760. Over the last 12 months, 4,701 Polish enterprises declared bankruptcy, which, as emphasized, is a record number. It was added that every industry except agriculture recorded an increase in bankruptcies.
Coface also points to record high inflation, high interest rates, rising fuel and energy costs and wage pressure as the reason for the increase in Coface bankruptcies.
The report stated that, similarly to 2019-2022, last year most companies decided to choose out-of-court proceedings to declare insolvency. 4,053 enterprises took advantage of this option, which is 60 percent. all organizations. 648 companies decided to undertake bankruptcy and restructuring proceedings conducted by the courts.
Legal options
As experts pointed out, the growing number of corporate insolvencies is partly due to the opportunities that Polish law provides for companies in difficult liquidity situations.
Chief Economist of Coface in Poland and the Central European Region, Grzegorz Sielewicz, explained that “in the first years of the previous decade, bankruptcies were mainly carried out to liquidate assets, then in 2016, court restructuring proceedings were introduced, which are aimed at implementing solutions enabling companies to return to effective business operations , and finally the pandemic years were full of aid activities and the introduction of quick out-of-court proceedings that were implemented into the Polish legal system,” he said. He added that “therefore, the increase in the overall number of corporate insolvencies should not be a surprise. However, it should be remembered that companies would not use them if they did not have such a need.”
Changes in all industries
It was emphasized that in 2023, almost all industries recorded an increase in insolvencies compared to the previous year. Only in agriculture there is a slight decrease in the number of insolvent enterprises (from 376 in 2022 to 347 in 2023). This trend continues from 2021.
It was reported that the services sector faced the greatest problems (as many as 1,401 insolvent companies). It was closely followed by trade, where 1,023 companies went bankrupt (there were 567 in 2022). The construction industry also recorded a significant increase in insolvencies – 638 companies (an increase of 128% compared to 2022) and the transport industry – 546 companies (an increase of 100% compared to 2022). These data are particularly alarming because the last two sectors are responsible for GDP growth.
As commented by the Director of the Coface Risk Assessment Department in Poland, Barbara Kamińska: “service providers constituted the largest group of insolvent entities (30%) compared to all registered proceedings in Poland. Training and event activities as well as hotel and catering activities were disrupted by the restrictions during the pandemic and then had to face the slowdown in demand caused by the geopolitical situation and soaring inflation. It is encouraging that the number of insolvencies in this industry began to decline in the second half of 2023. As she added, “last year also ended with the number of 1,023 insolvencies of commercial enterprises, which was an 80% increase compared to 2022. Thus, the result from 2023 exceeded the sum of readings from 2021-2022.”
Coface is a receivables insurance company that has been present on the market for 75 years. (PAP)
