Wave of corporate bankruptcies spreading in France

VTV.vn - According to statistics, the construction industry accounts for more than 20% of bankruptcies in France due to high interest rates, rising material costs and declining demand.

Wave of corporate bankruptcies spreading in France

In a recent analysis in the economic daily Les Echos, Mr. Ludovic Subran, Chief Investment Officer of Allianz Group, said that France is not outside the above trend. After a sharp increase in bankruptcies in 2024 with more than 66,000 cases, the number this year is forecast to reach nearly 67,500, far exceeding the pre-crisis level. Financial support mechanisms during the pandemic have ended, while public bailouts have also been withdrawn.

Three main factors are said to be pushing businesses into a difficult situation. First, the French economy is growing weakly, at around 1%, while domestic demand is being held back by cautious consumers. Exports are also being affected by a volatile global context: trade tensions, supply chain adjustments, and the slowdown in the US and German economies. According to estimates, the sharp decline in international trade could lead to thousands of additional bankruptcies in France.

Second, financial conditions remain tight. High interest rates, although showing signs of easing, continue to weigh on corporate cash flows. Payments are being extended, forcing many companies to refinance under less favorable conditions. Current returns are not enough to cover financing costs, pushing SME profit margins to their lowest levels in 10 years.

Third, changes in corporate structure also increase risks. The boom in new businesses, driven by digital transformation and the wave of artificial intelligence, while making the economy more dynamic, leaves many young companies in a precarious position. A sharp decline in the technology sector or investment in innovation could create a chain shock. Calculations based on the “Internet bubble” crisis of 2001-2002 show that there could be about 1,000 bankruptcies in a similar scenario.

According to statistics, the construction industry accounts for more than 20% of bankruptcies in France due to high interest rates, rising material costs and falling demand. The retail sector has also been hit hard by weak consumption and online competition. In the service sector, the rise of freelance workers increases risks, with even a cash flow shock causing many establishments to cease operations.

Ludovic Subran said that France is facing the risk of a “high normalization” of corporate bankruptcies – a phenomenon that is no longer temporary but has returned as a structural element of the economic cycle. This is not a short-term crisis, but a long-term process of adaptation to a world with higher costs, fiercer competition and more fragmentation.

However, a gradual recovery in credit by 2026 could help limit the damage, as a modest improvement in financial conditions could significantly reduce defaults. French companies still have some advantages: a high savings rate, a more diversified industrial structure than a decade ago, and a stable investment policy. However, caution is warranted, especially in the current period of budgetary austerity.

Source: https://vtv.vn/lan-song-pha-san-doanh-nghiep-lan-rong-tai-phap-100251028091701459.htm