Coface study: The number of insolvencies is increasing

• The datas indicates a 73% increase in the number of insolvencies at the level of companies with a turnover of over 5 million euros • The study notes a deterioration in payment behavior among companies, the number of payment incidents in the first half of 2024 being 29% higher than the same period last year

The number of insolvencies of companies in our country is increasing, according to the latest Coface Romania study, published yesterday, and where, from the data for the first semester of 2024, they note that 3,684 new insolvency procedures were opened, an increase of 8.32% compared to the same period last year. Most companies that entered insolvency in the first semester of the current year operate in wholesale and retail trade (986), construction (766) and the manufacturing industry (437), fields that represent 60% of the total number of open insolvencies. The data also show a 73% increase in the number of insolvencies for companies with a turnover of over 5 million euros, compared to the same period last year, and a double number of insolvencies for companies with a turnover between 500,000 and 5 million euros.

Alina Popa, Coface Romania Country Manager, said: "Although the business environment in Romania has slightly returned to normality before COVID-19, it is not without challenges such as the large budget deficit, military conflicts, but also the attempt of the main central banks to reduce monetary policy interest rates (US, EU) while maintaining a downward trend in inflation. For the second part of 2024 we expect a deterioration of the business environment which will lead to an increase in the number of payment incidents and insolvencies. This evolution can also be observed in other states, for example in Germany where the number of open insolvencies in the first part of 2024 reached the maximum of the last 8 years".

Tiberiu Chesoi, Head of Claims Department Coface Romania, stated: "The most important reasons why companies went into insolvency differ depending on the activity sector in which they operate, but we believe that the most important are the increase in financing costs and operational expenses , the decrease in sales and the increase in debts, especially the supplier credit. It is also worth mentioning that during this period the largest number of deregistered companies was registered in the last semesters, but also the smallest number of registered companies".

Moreover, according to the Coface study, in the first 6 months of 2024, 68,223 companies were registered, this being the lowest value in recent semesters, including the first semester of 2019. A negative evolution is also observed in terms of the number of companies deregistered, in the first semester of 2024, 45,547 companies were deregistered, an increase of 34% compared to the same period in 2023. The decreasing ratio in recent years between new registrations and deregistrations has caused the growth rate of companies active in the economy to decrease, currently standing at just over 1.25 million active companies.

The cited source also shows that the insolvencies in the first 6 counties (Bihor, Cluj, Timiş, Iaşi, Ilfov, Braşov) and Bucharest represent approximately 50% of the total number of insolvencies, a fact that should not be a surprise because approximately 49% of the companies assets from a legal point of view in Romania are registered in these counties.

According to data provided by the National Bank of Romania, in the first six months of this year, 19,031 payment instruments were refused payment, while the total amount refused payment was 1,134 million RON. Although the total amount refused payment decreased by 4% compared to the first half of 2023, the total number of payment instruments refused increased by 29% compared to the same period.