Corporate Insolvencies in May: Decline in Germany

According to the Federal Statistical Office, Germany's insolvency courts recorded fewer proceedings against companies in May than in April. According to the IWH, the decline was only minor and lies within the range of usual monthly fluctuations.

The background to this development is a series of burdening factors that have been affecting companies for some time. These include high energy and financing costs, a weaker domestic economy, and the uncertainty of many firms in view of geopolitical tensions and tougher trading conditions.

Regional Differences and Affected Sectors

The IWH pointed out that insolvencies typically respond to economic changes with a delay. Even if the economy gradually recovers, an elevated number of proceedings is to be expected in the coming months, the researchers emphasized.

There are clear regional differences. In some federal states, including Bavaria, the number of applications to open insolvency proceedings declined in May, while in others it stagnated or rose slightly. The IWH experts therefore speak of an overall mixed picture.

The VID also observes that larger medium-sized companies are increasingly affected. These firms often run into difficulties not because of short-term drops in revenue, but due to a combination of rising costs, declining demand, and difficulties with follow-up financing.

Outlook: No Quick Relief in Sight

For the coming months, both the IWH and the VID do not expect a rapid easing. Christoph Niering warned that the wave of insolvencies is not yet over. The Federal Statistical Offices also point out that the available data refer to May and therefore do not yet reflect further developments.

Overall, the experts assess the slight decline in May as a temporary breathing space. As long as structural problems such as high financing costs and subdued demand persist, the risk of further insolvencies will remain at an elevated level.

Against this backdrop, policymakers and business associations are discussing possible support measures, such as better equity capital for medium-sized firms, faster approval procedures, and relief on energy and bureaucracy costs. However, no concrete decisions have been reported so far.