Business failures rise in France: + 34.6% in the first quarter

The indicators turn red one after the other. After a slowdown in the French economy expected in the first quarter, the horizon is darkening for French companies. Driven by emergency measures “whatever the cost”, many sectors have been able to take advantage of the lethargy of the commercial courts for many months.

With the gradual disconnection of all these crutches and the deterioration of the war-related economy in Ukraine, most economists predict an increase in bankruptcies. In this highly uncertain environment, fears of stagflation and recession are growing. The consequences of the war in Ukraine can deliver a coup de grace to the world economy “, Oxford Economics economist Daniela Ordonez said at a recent press conference.

“No territory spared”

In its latest report presented on Monday, April 11, it was recorded by the research firm Altares, which specializes in business data a 35% increase in bankruptcies between January and March compared to the first quarter of 2021. “In the first quarter of 2022 the noose of the health crisis loosened and aid stopped. A return to a form of normality that also implies a resumption of defaults. Therefore, the rise begins and it is already very clear in the sectors that rely on the resumption of consumption habits such as going to the restaurant or the hairdresser. No territory is spared from the phenomenon “, underlines Thierry Millon, Director of Studies of Altares.

The outbreak of the war in Ukraine and its economic consequences on the Old Continent could accelerate the difficulties for a good number of sectors. “By early 2022, confidence in the future was gaining ground: cash levels and well-filled orders suggested an economic recovery. However, since February 24 and the beginning of the Russian invasion of Ukraine, the horizon has darkened: energy prices, supply shortages, shortages of materials, rising inflation … many signs that encourage caution ” , He adds. The expert also does not foresee a wave of bankruptcies in the coming months. With the second round of presidential elections approaching April 24, this recovery in the first quarter could overshadow outgoing President Emmanuel Macron’s results.

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An increase even lower than the pre-crisis level

The number of failures jumped compared to the first quarter of 2021, from 7,406 to 9,972, an increase of 34% .6%. However, it remains well below the pre-Covid levels recorded in 2018 (14,698) and in 2019 (14,146). It seems that young companies are the hardest hit by this bankruptcy movement. In fact, nearly half of the companies that filed for bankruptcy in the first quarter were created less than five years ago.

Those registered shortly before the onset of the pandemic or during the health crisis particularly suffered (+ 52%). “The difficulties of young companies are particularly marked in” multi-department “activities (mainly food shops) where defects are three times more numerous in this quarter; but also in catering (+ 180%), where the number of cases is was exceptional low a year ago “, the study authors report.

SMEs in the balance

Depending on the size of the company, small and medium-sized enterprises (SMEs) with fewer than 50 employees face much more difficulties than larger ones. The number of insolvencies thus jumped by 56% between January and March compared to the first quarter of 2021, surpassing the pre-crisis level. On the other hand, companies with more than 50 employees seem to be resisting this wave of bankruptcies.

Trade and catering have hit hard

The other lesson from this study is that consumer-facing activities are at the forefront. It mainly deals with trade, catering and private services. In general, the food (+ 83%) or the clothing trade (+ 34%), the increases are dizzying.

For restaurants, this increase is not surprising given the long months of closure of all the establishments. Many restaurateurs had expressed strong fears when government aid was disconnected. Added to this were the large number of resignations and serious recruitment difficulties since the fall of 2021.