The jump is impressive. According to data published this Friday, January 5 by the Bank of France, the number of business bankruptcies increased by more than a third in 2023 to reach 55,492 at the end of December. According to the bicentennial institution, this progression is primarily due to a post-Covid catch-up effect.
For L’Express, Denis Le Bossé, president of the ARC firm, specializing in debt recovery, analyzes this assessment and projects to the year 2024. According to him, several sectors will need to be closely monitored while a key factor in bankruptcy filings will need to be better taken into account by business leaders: the lack of equity.
Are you surprised by the increase of almost a third in the number of business failures in 2023?
It was expected. We see through our activity within the ARC firm that a new increase will take place in 2024 compared to 2023.
What does this say about our economy? Is this really a post-Covid effect?
Yes, it’s a catch-up. During the Covid period, businesses were largely helped and we also supported companies that were in difficulty before the crisis. As a reminder, the number of bankruptcy filings fell in 2020, 2021 and 2022. We are also facing a change in the market since today you have changes in the way of consuming. The Covid period has particularly highlighted online shopping and the need for brands to adapt. This is particularly true in catering, in ready-to-wear or even in real estate which is changing because there is an increase in interest rates, which leads to agency closures. . We are in a phase of market adaptation.
How long could this catch-up last?
It all depends on economic parameters. This month we will celebrate four years of Brexit, with England suffering economically. France’s main customer, Germany, is going through a period of uncertainty because China, its largest trading partner, has seen its economy slow. With Ukraine and the Israeli-Palestinian conflict, geopolitical uncertainty is major. However, we can be quite optimistic in 2024 for the French economy, with inflation stabilizing and interest rates under control.
A certain number of French companies are suffering, but this is part of the rules of a market economy. The main factor in these difficulties is undercapitalization. The majority of companies that encounter difficulties lack equity and this is a French problem, if we compare ourselves to our neighbors. They cannot obtain additional financing from their bank. And banking establishments today do not finance a VSE or SME which lacks equity and which has not repaid its State-guaranteed loan (PGE). This is normal since the company does not provide the necessary guarantees.
Which sectors should we pay attention to in 2024?
I spoke previously about real estate agencies, but we will also need to monitor service providers and advice. There is also the hotel and catering industry. It’s very disparate: you have certain territories like the Paris region where these professions work very well, but in others, we see dysfunctions. The transport sector is suffering, just like the construction sector which, after experiencing euphoric years, is encountering difficulties linked to the rising cost of raw materials and the lack of labor. Companies have therefore had to file for bankruptcy even though their order books are full. They have not been able to adapt to the rapid evolution of the situation.
You anticipate a further increase in the number of failures in 2024. What can be done to reverse the trend? Should the State intervene again?
I think the State did everything during the Covid period. Measures to support the economy in the face of increasing energy costs have been put in place. Afterwards, it is about sound business management. To function well, they need to have the trust of their banker and their credit insurer. However, 60% of companies note that credit insurers downgrade the rating and withdraw at the first misstep. They must also control their order book and not let themselves get carried away. A full order book requires cash to pay employees and suppliers. This ratio must be respected and this is what allows companies to weather crises. Companies that file for bankruptcy are often those that have not solved this equation.
Today, it is not up to the government to manage the cash flow of companies, but to the bosses. We have public aid schemes which work quite well, but our barometer shows that more than 50% of VSEs and SMEs are not aware of them. There really is a need for popularization by the accountant, because he is the only relay on this subject within small businesses.
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