After a record rise in GDP in 2021, inflation is causing a violent backlash in 2022 for companies whose default rate rose 23.1% yoy in July. The most troubled are the companies with fewer than 20 employees that combine the reimbursement of the PGE with the energy crisis. Once again, the state is called to the rescue.
There are two ways of looking at the economy: glass half empty or glass half full. From official sources – it’s fair game – it’s not all that bad. GDP recorded record growth in 2021 with a 7% increase. And the number of business failures (understand, receivership) remained just above 3,000 in July 2022, “as globally since the beginning of the year” notes the Banque de France, which observes 34,653 bankruptcies in one year, a decline by 32.2% compared to 2019, before the start of the health crisis.
TESTIMONIALS. Small and medium-sized enterprises in difficulty: “One year later, our heads are back in the broth”
Long live “whatever it takes”! Not that easy. First of all, because the data are unbalanced by the slowdown in the activity of commercial courts in 2020 and 2021, following the temporary modification of the dates of the declaration of suspension of payments and of the cash support measures, measures costing 80 billion euros (1) Bruno Le Maire reminded the State a few days ago.
Added to this are the 160 billion euros granted by banks through State-guaranteed loans (PGE), loans that the vast majority of companies have started to repay. An additional burden that is sometimes difficult to assume for companies that, in 2020, had not foreseen the hike in the prices of energy and other raw materials essential to their business that would follow two years later.
The most troubled are these so-called “zombie” companies, backed by public money when they were already fragile before the crisis. Their duration was artificially extended by two years. But they were the first to knock on the door of commercial courts in the second half of 2021, hence the 23.1% increase in corporate bankruptcies between July 2021 and July 2022.
“A further obstacle from 2023”
And this is just the beginning, warns Jocelyne Marti, deputy general manager of the bank Delubac et Cie, which specializes in supporting companies in receivership. “Failure indicators are gathered and the hour is with concern for companies. End of government aid and the policy of any cost, increase in energy prices, increase in the cost of raw materials …
All factors will then lead to a number of business failures across industries. The state has supported businesses through the PGE until June 2022. And all the banks have gladly signed up to this effort though, he recalls. Unfortunately, when the machine stops producing real wealth, it saves appearances by flooding economic actors with fictitious liquidity with no counterparty, but this liquidity will have to be repaid. A further obstacle for companies from 2023 ”, according to Jocelyne Marti.
Especially for those who have a strong need for electricity, such as catering, automotive, factories that can no longer operate their ovens …
Already, for these sectors, this is reflected in increases in failures well above the average: “+ 111% in one year in catering from July 2021, + 100% for bakers, + 87% for consumer premises, + 86% for hairdressing salons and beauty centers, + 40% in the plaster sector … This explains why the average increase in bankruptcies in companies with fewer than 10 employees is not 23.1% but 44.4% in the last 12 months. Of course, we are 2.6% fewer failures than in 2019, but it is a difference of a third compared to all companies which are 32% less than in 2019. let’s say there is a problem with VSEs ” , estimates Marc Sanchez, the general secretary of the union of the Independents, these small companies that support 6 million employees and small bosses in France. And for him, this is just the tip of the iceberg.
“The Banque de France does not count the voluntary cessations of activities, which went from 102,052 in 2019 to 183,376 in 2021. This is + 80% in two years. No, we cannot consider that the situation is improving. We have to help ourselves. ” Again.