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Unexpected recovery in business bankruptcies at the end of 2021, weighs Omicron in 2022

After 18 months of almost continuous decline in bankruptcies and a “whatever the cost” policy, will this trend reverse? Will the tightening of aid in certain sectors and the emergence of an omicron variable affect sectors flooded with frequent waves of pollution? One thing is for sure. According to a report from Altares revealed on Monday, January 17th, “2021 ended with very significant defaults. All categories of companies recorded declines over the course of the year, but not all sectors experienced the crisis in the same way. The overall positive figure does not reflect specific situations,” La Tribune told Thierry Mellon, director of studies at Altares.

Last fall, some economists were counting on an increase in bankruptcies in France in 2022. At Euler-Hermes, in a particularly pessimistic scenario, chief economist Anna Boatta identified a 40% increase this year. For his part, Thierry Mellon is betting on “normalizing” the failures. The high-speed rotation of the Omicron variable in pollution chains has caused most forecasting institutes to revise the GDP growth figures for the fourth quarter of 2021 downward. activity during the first quarter of 2022.

Omicron risks hampering growth, Banque de France cuts its 2022 forecast

Bankruptcies rise in December 2021

A detailed year-end review shows some troubling signs. The gradual outage in aid since the end of August, chaos in supply chains and rising energy prices are all affecting businesses’ cash flow.

“In the fourth quarter of 2021, the behavior is deteriorating. […]You should pay attention. When the year ends, small and medium businesses set the budget. Company funds will not always be there to meet the following deadlines. There may be a risk of non-payment.” Thierry Mellon continues.

In December, bankruptcies increased by 9% compared to December 2021. In the last quarter, the situation in construction was more serious. Structural works, general construction, individual home construction, and public works are affected. In real estate, the situation is more bleak with the explosion of bankruptcies in real estate development (+54%) and to a lesser extent, real estate agencies are facing difficulties (+9%).

In December 2021, most sectors and regions are shown in red. In the industry, there are tensions over cars. In the building, we noticed tensions. France has reached a low level of bankruptcies”, expert says.

A dark end to the year in the industry

The other point of vigilance concerns the industry. In fact, industrial companies have generally seen a positive trend with bankruptcies down 12% last year. On the other hand, the year-end was bleaker with a 7% jump in bankruptcies. Geographically, some areas are starting to suffer at the end of the year. Among the regions with the highest exposure are Hauts-de-France (+23% compared to the fourth quarter of 2020), Center-Val-de-Loire (+21.8%) and Pays de la Loire (+10%).

On the other hand, the PACA region, Île-de-France and even the Grand Est do well both year-round and in the last quarter. “The end of 2021, which was marked by the sudden arrival of a new epidemic wave, led to the adoption of new restrictions at the beginning of 2022. A situation that revives a strong sense of uncertainty among entrepreneurs,” Thierry Mellon added. Despite these warning signs, the director of studies remains optimistic for the coming months.

2022 should be a very good year. At the moment, the situation appears to be calming down and international activity has recovered.

Bankruptcies are at their lowest level in 35 years

This rebound in year-end bankruptcies comes when only nearly 28,000 failures were recorded over the whole of 2021. This is a decrease of 12% compared to 2020 and 45% compared to 2019. Before the health crisis, France’s bankruptcy numbers were around 50,000 each year and over 10 years, the average was 44,000. There was a lot of effort in public support. The level of failure is very low. It bodes well on the employment front and the business front.” However, the situation could ‘return to normal’ in 2022. Presented by Thierry Mellon.

General decline in 2021

One of the main lessons of this extensive study of nearly 50 pages is that all sizes of companies recorded declines in bankruptcies by rates between -6% and -38% during 2021. Most major sectors have also survived sequential closures. While some companies in the automotive, metallurgical or mechanical industries have particularly suffered from the epidemic, in particular due to the sharp drop in activity, others have been maintained, such as the hotel, cafe and restaurant industry (UNHCR). Despite full months of lockdown, the drop in bankruptcies is staggering with a record 36.8% for UNHCR.

It must be said that the aid implemented (Solidarity Fund, Partial Unemployment, PGE, coverage of fixed costs) since the beginning of the epidemic has made it possible to maintain a significant part of the enterprises, especially in the S1 and S1 bis sectors.. Geographically, all French regions also recorded a decrease In cases of bankruptcy except overseas in France. In Normandy and Corsica, the declines were impressive with 25% and 31% fewer failures, respectively, compared to 2020. The situation may change in the coming weeks.