After July 2022, almost all government-run financial COVID-19 support programs in Europe ended, fueling concerns by supply chain managers about a potential rise in financial troubles among their supplier bases. Coupled with record high energy costs in Europe that have already forced energy-intensive manufacturers to reduce or stop factory activity, financial distress at a supplier level has significantly increased in recent months.
Many supply chain analysts expected that general corporate insolvency filings would start to return to normal levels in the third and fourth quarters of 2022. But despite mounting financial pressures, our research shows the overall number of European insolvencies declining since the start of the pandemic. Why the decrease in insolvencies at a time when financial pressures are increasing?
This disconnect can be largely attributed to new financial support programs for companies and their workforces.
Due to increasingly high energy costs, several European countries recently created new financial support programs for energy-intensive industries that have seen energy costs double or triple compared to 2021. Germany and France, for example, have set up support programs for their most energy-consuming companies in recent weeks, while the UK is considering plans to subsidize power bills for energy-intensive industries such as steel and cement.
Most insolvency filings in 2022 come from key sectors including retail, construction, and hospitality. Everstream Analytics’ insolvency data focuses on manufacturing and logistics suppliers, which paints a different picture of the overall situation.
Our analysis of five of the world’s largest economies by GDP revealed that manufacturing- and logistics-related insolvency filings are tracking at lower levels for the entire year of 2022 in Germany, Italy, and the U.S., while insolvency filings in France could slightly increase. Only the filings in the UK have already surpassed 2021 levels, standing 16% higher, even before the end of Q3.