German businesses are hitting a breaking point as rising costs and dwindling demand force many to shut their doors.
In October, the number of regular insolvency filings jumped a staggering 22.9% compared to the same month last year, according to the Federal Statistical Office. Since mid-2023, the increase in bankruptcies has consistently remained in the double digits—except for June 2024, which saw a smaller rise of 6.3%. It’s worth noting that these filings often reflect events that occurred about three months prior, making the problem even more pronounced.
The German Chamber of Commerce and Industry (DIHK) has called the trend alarming. Marc Evers, a DIHK expert on small and medium-sized enterprises, explained, “Pioneering demand from home and abroad, high costs for energy and specialists, considerable burdens from taxes and bureaucracy – all of this depresses the business prospects and the financial situation.” This year alone, more than 20,000 business bankruptcies are expected—a grim milestone.
In August, local courts registered 1,764 corporate insolvency filings, marking a 13.4% rise from the previous year. Creditors’ claims soared to €2.4 billion, up from €1.8 billion in the same period last year. However, consumer insolvencies told a different story, declining by 2.9% to 5,672 cases.
Economists blame this surge on a “perfect storm” of challenges. Steffen Müller from the Halle Institute for Economic Research explained, “Many weaker companies that survived in the low interest rate phase and with support during the pandemic are now under massive pressure with greatly increased costs.”
The construction industry, hospitality sector, and transportation services have been hit hardest. In August, these sectors recorded the highest bankruptcy rates, with transportation and storage leading at 9.2 bankruptcies per 10,000 companies.
To make matters worse, fear is spreading among businesses. A survey by the Munich-based Ifo Institute revealed that 7.3% of companies felt their economic survival was at risk in October, up from 6.8% the previous year. Klaus Wohlrabe, head of Ifo surveys, warned, “The steady increase in corporate insolvencies is likely to continue.”
With rising interest rates, energy prices, and bureaucratic hurdles piling on, Germany’s economic landscape looks increasingly precarious.
