German insolvencies surge to record high in July: IWH

Berlin: Germany saw an unexpected surge in insolvencies among both individual and corporate entities in July, according to a report published Thursday by the Halle Institute for Economic Research (IWH).

The latest data from the IWH insolvency trend indicates that 1,406 companies and individual entities filed for insolvency in Germany during July, marking the highest monthly total in nearly a decade, up 37 per cent over the same period in 2023. This figure eclipses the previous peak recorded in April 2024.

Compared to June, insolvency filings rose by 20 per cent in July.

The sharp increase was more pronounced than the IWH had initially forecast.

The manufacturing sector was particularly affected, experiencing a marked uptick in bankruptcies. In June, 100 manufacturing firms filed for insolvency, consistent with the 12-month average, but this number surged to 145 in July, the highest figure since the IWH began tracking industry-specific data in January 2020. The states of Berlin, Hesse, and North Rhine-Westphalia were notably impacted.

Large employer bankruptcies can lead to significant and lasting income and wage losses for affected workers. The number of jobs impacted by major insolvencies is a key indicator of the broader impact on the labor market. The IWH analysis shows that in the largest 10 percent of companies whose insolvency was reported in July, almost 10,000 jobs were affected.

"We expect a slight decline in insolvencies in August, followed by another increase in September, insolvency figures are likely to remain consistently above pre-pandemic levels for the foreseeable future," said Steffen Mueller, head of the IWH's Structural Change and Productivity Department and the insolvency research unit.