A wave of business bankruptcies is spreading in France.
In a recent analysis in the economic daily Les Echos, Ludovic Subran, Investment Director of Allianz Group, argued that France is not immune to this trend. After a sharp increase in bankruptcies in 2024 with over 66,000 cases, this year's figure is projected to reach nearly 67,500, far exceeding pre-crisis levels. Financial support mechanisms during the pandemic have ended, while public bailout packages have also been withdrawn.
Three main factors are believed to be pushing businesses into a difficult situation. First, the French economy is growing weakly, at only around 1%, while domestic demand is constrained by cautious consumers. Exports are also affected by a volatile global environment: trade tensions, supply chain adjustments, and the slowdown in the US and German economies. It is estimated that the sharp decline in international trade could lead to thousands of additional bankruptcies in France.
Secondly, financial conditions remain very strained. High interest rates, despite signs of decline, continue to impact business cash flow. Delayed payments force many companies to refinance under unfavorable conditions. Current profitability is insufficient to cover financing costs, causing profit margins for small and medium-sized enterprises (SMEs) to fall to their lowest level in 10 years.
Thirdly, changes in business structure also increase risk. The boom in new businesses, driven by digital transformation and the wave of artificial intelligence, while making the economy more dynamic, also leaves many young companies in a precarious position. A sharp decline in the technology sector or investment in innovation could create a chain reaction. Calculations based on the 2001-2002 "Internet bubble" crisis suggest that around 1,000 bankruptcies could occur in a similar scenario.
According to statistics, the construction industry accounts for over 20% of bankruptcies in France due to high interest rates, rising material costs, and declining demand. The retail sector is also heavily impacted by weak consumer spending and online competition. In the service sector, the rise in freelance workers increases risk; even a single cash flow shock could force many businesses to cease operations.
Ludovic Subran argues that France is facing the risk of a "high normalization" of corporate bankruptcies – a phenomenon no longer temporary but returning as a structural element of the economic cycle. This is not a short-term crisis, but a prolonged adaptation process to a world with higher costs, fiercer competition, and greater fragmentation.
However, a gradual recovery in credit by 2026 could help mitigate the damage, as improvements in certain aspects of financial conditions could significantly reduce the number of defaults. French businesses still have several advantages: high savings rates, a more diversified industrial structure than 10 years ago, and stable investment support policies. Nevertheless, caution is still needed, especially during the current period of budget austerity.
Source: https://vtv.vn/lan-song-pha-san-doanh-nghiep-lan-rong-tai-phap-100251028091701459.htm
Comment (0)