Global Bankruptcies Surpass 2008 Levels Amid Rising Interest Rates and Reduced COVID Subsidies

The global corporate sector is facing an unprecedented wave of bankruptcies, with a double-digit surge unseen in decades, according to data from national statistics offices reported by the Financial Times. The impact of soaring interest rates and the winding down of COVID subsidies has taken a toll on businesses worldwide.

In the United States, business insolvencies witnessed a staggering year-on-year increase of 30% in the 12 months through September. Germany, the largest economy in the European Union, reported a 25% rise in bankruptcies from January to September compared to the same period the previous year.

Across the EU, bankrupt companies grew by 13% in the nine months to September, reaching an eight-year high. In October, France, the Netherlands, and Japan experienced over 30% more bankruptcies than the previous month. Some member states of the Organisation for Economic Cooperation and Development (OECD), including Denmark, Sweden, and Finland, have reported bankruptcy rates surpassing those seen during the 2008 global financial crisis.

In England and Wales, insolvencies reached their highest level since 2009 from January to September of the current year.

According to Neil Shearing, chief economist at Capital Economics, the trend is attributed to higher interest rates and the self-liquidation of "zombie firms" that survived the COVID era, primarily due to government support. The withdrawal of massive government support schemes for companies and households, coupled with central banks raising interest rates to combat inflation, has contributed to the surge in bankruptcies.

As central banks' rate hikes are expected to continue in the coming months, many businesses will face the challenge of refinancing debt at higher rates, sustaining the trend of increased bankruptcies.