The business landscape in France is facing unprecedented challenges as a recent report from a professional organization revealed on January 8 that the number of corporate bankruptcies in 2024 is projected to exceed 66,000, marking the highest figure since 2009. This wave of bankruptcies has dire implications, threatening approximately 260,000 jobs across the countryThe surge in corporate failures already raises concerns about the overall economic stability, prompting discussions on what can be done to mitigate these alarming trends.

According to the data provided by BPCE banking group's observatory, the 2024 forecasts indicate that the total number of business bankruptcies will amount to 66,422, a staggering 28% increase compared to 2019, before the onset of the COVID-19 pandemicThe observatory has been closely monitoring the statuses of business restructures and liquidations since 2010, aiming to understand the trends that contribute to these significant numbers.

Amidst the challenges, it is noteworthy that some companies that managed to "survive" during the pandemic have been delaying their inevitable closures

Data reveals that a total of 5,265 small and medium-sized enterprises (SMEs) and intermediate-sized enterprises faced bankruptcy in 2024, including several renowned brands like Duralex, Le Coq Sportif, and CaddieThis figure represents a worrying 51% increase from 2019, highlighting the struggle that many well-known names in the French market continue to endure.

The report also pointed out that the alarming rates of corporate bankruptcies are partially attributed to a lagging effect of approximately 53,500 companies that managed to avoid bankruptcy during the pandemic (from 2020 to 2022). Despite the high numbers, the organization emphasizes that the current state of bankruptcies is compounded by multiple factors such as the economic slowdown, rising inflation, increased interest rates, and ongoing economic policy uncertainties.

In line with these trends, a notable 56% of leaders from micro and small enterprises expressed concerns that political uncertainties significantly impact their business operations

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Many of these leaders have consequently decided to postpone their investment projects, while 21% have opted to cancel their investments altogetherThis reluctance to invest further compounds the issues faced by the struggling economy and raises questions about the future viability of these businesses.

Looking ahead, the organization predicts that business bankruptcy numbers are expected to escalate further in 2025, potentially reaching around 68,000. While the bankruptcy rates seem alarmingly high, they remain lower than originally anticipated in light of recent events.

For media observers, the trajectory of increasing bankruptcies post-COVID reveals a disconcerting trend, suggesting that the economic situation might be undergoing a significant reversalAlthough the yearly statistics raise valid fears, it's crucial to consider that the last quarter of the year saw an accelerated increase in bankruptcies, totaling 17,966, in comparison to 16,712 in the previous year

This surge in figures undeniably places 260,000 jobs in jeopardy, but it does not necessarily imply an outright loss of all threatened positions nor a guaranteed end for all companies entering bankruptcy proceedings.

Reflecting on 2023, there was already an 8% rise in the number of bankrupt businesses, with a total of 56,600 reportsAlarmingly, projections by BPCE suggest that the trend is set to continue, in which the "wave of bankruptcies" could achieve an all-time high of 68,000 by 2025, representing a 2% increase from 2024, with any expectation for recovery pushed out to 2026.

Despite the severe outlook, there remains an element of cautious optimismAltares, a specialized firm focusing on business bankruptcy studies, recently shared a relatively positive assessmentThey observed that business activities in the consumer sector have begun to recover and that the construction industry has exceeded expectations, leading to a gradual reduction in their bankruptcy rates since last spring, signaling a potential shift towards recovery.

Additionally, when comparing total bankruptcy numbers from the previous year to the long-standing averages, it becomes clear that the situation is not as dire as it may appear

During the pandemic, the number of layoffs remained exceptionally low: 32,000 in 2020, 28,400 in 2021, and 42,500 in 2022, contributing to the average number of closures before the pandemic, which hovered around 55,000 annually.

In response to the economic shock imposed by the pandemic, the French government employed various emergency measures, including state-backed loans and solidarity funds, aimed at providing "lifelines" to struggling companiesAs society resumed normalcy, it was anticipated that many of these 'barely surviving' businesses would inevitably collapse; however, this widespread failure has yet to materialize.

According to Altares' research director, the phenomenon of corporate bankruptcies reflects a tragic aspect of societyEven coordinating the historical data with pre-pandemic levels indicates that business closures annually should have reasonably reached about 70,000 to 75,000 enterprises

Nevertheless, even in 2024, the number of bankruptcies did not exceed the threshold of 70,000, and specialized predictions indicate the figures will remain below this mark through 2025. This data signifies that the bankruptcy rates in the post-pandemic five-year span are still lower than those recorded in the five years preceding the pandemic.

Despite the critical landscape, it is vital to approach the situation with a sense of caution rather than panicThe director of research and predictions at BPCE argued that while rising bankruptcy numbers are concerning, certain indicators warrant attentionIt is important to recognize that the current climate should not be interpreted simply as a natural market correction where 'weaker' companies are being 'naturally culled' due to a lack of government intervention.

What is truly alarming, as noted by Turkieman, is that the uptick in bankruptcies primarily affects small and intermediate-sized enterprises

The data shows that businesses with less than three employees have experienced a 25% increase in bankruptcy rates, while the rates for smaller firms employing a few dozen to a few hundred employees have risen by 50%. Several prominent brands collapsing in 2024 have underscored these alarming trends.

Interestingly, as noted by BPCE economist Rogier, factors that once indicated business resilience, such as size and maturity, no longer guarantee survivalResearch has indicated that among companies that were saved from bankruptcy through government aid, 37% are now showing indicators of collapse, a rate that reaches an alarming 100% for small and intermediate-sized businesses in that sector.

The weakening business landscape can be attributed to a myriad of factors, including economic downturns, political instability, fiscal challenges, and an uncertain policy directionIn this environment, both consumers and businesses are reluctant to engage, leading to a stagnation in economic growth that further exacerbates the challenges faced by companies trying to remain afloat