Executive Summary

As expected, 2023 recorded a high-speed and broad-based rebound in business insolvencies and 2024 started with insolvencies above pre-pandemic levels in most advanced economies. The number of business insolvencies rebounded in three out of four countries in 2023, with most recording a double-digit increase. Globally, the average increase in business insolvencies accelerated from +23% in 2022 to +29% in 2023, the fastest momentum since 2009 (+33%). The exceptions were mainly in emerging markets, notably the BRICS, but they account for a noticeable share of global GDP (30%) and thus our global insolvency index (38%), lowering the annual increase of our headline indicator. Overall, our global insolvency index increased by +7% y/y for the full year 2023, from +1% in 2022. Western Europe remained a key contributor to the global rise despite a slower rebound (+15% y/y), with a stable momentum at the Eurozone level (+14%). North America also boosted the global rebound, with the US recording a major surge (+40% y/y), while the prolonged low number in China offset the increase in insolvencies observed in most other Asian countries (Japan, South Korea, Australia, Hong Kong, New Zealand).

Looking ahead, we expect another acceleration in global business insolvencies in 2024 (+9% y/y), before a stabilization at a high level in 2025. Four out of five countries will see business insolvencies increasing in 2024 (+12% y/y on average), with the largest increases likely in the US (+28% y/y), Spain (+28%) and the Netherlands (+31%). The broad-based rise would push two out of three countries above their pre-pandemic number of insolvencies in 2024 (2016-2019 average), up from half in 2023. In 2025, however, we expect a stabilization of our Global Insolvency Index, with a majority of countries posting a trend reversal (-9% y/y in simple average for the countries concerned). European countries in particular would see the largest decreases, most often from a strong bounce-back over 2021-2024 and/or from a historic high.

We identify five main challenges that will make 2024 a year of reality checks for firms and the economy, in particular in Europe:

• Reality check #1: A profitability squeeze is looming. Before benefiting from the global recovery in sight for 2025, firms will have to manage the deceleration in global demand. In particular,    the US, the Eurozone and emerging markets, including China, will face below-trend GDP growth that will increase the pressure on profitability at a time of still-high operating costs, with little    relief from energy prices, continuing wage growth and lingering supply-chain pressures (e.g. Red Sea, Panama canal). As of mid-February, analysts have revised down their estimates for    earnings per  share (EPS) for the full year 2024 by -0.7pp globally, with similar revisions for Europe (-0.7pp) and the US (-0.8pp).
• Reality check #2: Uncertainty is on the rise, from geopolitics to rising non-payment risk. After a series of shocks in recent years, the packed election calendar in 2024 will add to economic      uncertainty as countries that account for 60% of global GDP head to the polls. This context will add a layer of complexity and risk to business operations by making it harder for firms to make       accurate forecasts and business plans, and creating volatility in input costs, such as for raw materials, and FX, making it difficult for firms to effectively manage their supply chains and       budgeting processes. Moreover, regulation is also on the rise, which may force firms to make costly additional efforts to comply. Our non-payment risk score reveals that firms are getting more       and more concerned by non-payment.
• Reality check #3: Financing and liquidity conditions are still tight. Firms will continue to face costly financing, maintaining concerns over their capability to absorb the costs of borrowing and   mitigate the pressure on overall profitability. At the same time, the limited availability of financing will put the most exposed sectors and firms at risk, while the number of fragile firms remains      noticeable in the UK (15%), France (14%), Italy (9%) and Germany (7%).   
• Reality check #4: New businesses will face their first real resilience test. The post-pandemic acceleration in business creation is likely to push up the ‘natural’ rise in business insolvencies in    2024. In Europe, for example, new business registration proved to be +14% higher in 2021-2023, compared to 2016-2019. For those firms, this will be the first ‘true’ test of resilience, especially in    the countries that saw the most new businesses created, notably France (+47%), the Netherlands (+28%) and Belgium (+14%). In terms of sectors, the information/communication (+32%),      transportation/storage (+28%) and real estate/B2B services (+24%) are the ones to watch.
• Reality check #5: Some sectors pose higher risks to jobs and the economy, with construction and real estate catching up with hospitality, transportation and wholesale/retail. The sectors and firms most exposed to the risks of weaker-for-longer demand and prolonged high financing costs are those that rely on discretionary spending (manufacturing and retail of non-essential goods, hotels, restaurants, tourism and other leisure activities) and labor-intensive ones (construction, road transportation, hotels, restaurants, health care, specific business services). Construction and real estate, which already experienced noticeable jumps in Europe and Asia in 2023, will boost national numbers of business insolvencies due to the cyclical downturn and for business    demographic reasons. The continuation of the most recent pace would mean over 16,000 firms going bust in France, over 7,000 in the UK, close to 4,000 in Germany and 2,000 in Italy.