Why insolvencies are surging in Germany

DW (English)

Corporate insolvencies in Germany have hit a 10-year high. From rising costs to weak demand, what’s behind the surge? And what can be done to support struggling businesses before it’s too late?

Transcript

00:00Bernd Wigge is an insolvency administrator.

00:07Currently, he's assessing an industrial company using a 3D camera to capture a coding room.

00:17High-tech tools help him document complex industrial plants and their material value, an increasingly common task.

00:26The rise in insolvency cases is significant.

00:32From our perspective, this reflects the broader economic situation.

00:37Liquidity crunches in many areas, declining earnings and a shift in banking policies, where loans are harder to secure,

00:46all contribute to rising insolvencies and bankruptcies during a recession.

00:53All valuable assets must be assessed. German insolvency law prioritizes business rescue.

01:00But with more companies unable to recover, Bernd Wigge often has to liquidate assets by putting them up for auction on his platform.

01:14In 2019, Germany recorded well over 18,000 business insolvencies.

01:20The number dropped in 2021 and then rose again, surging past 22,000 in 2024.

01:31Private or consumer insolvencies declined slightly in 2020 to 42,000 cases.

01:39However, they have since risen steadily to more than 72,000 cases in 2024.

01:46The situation is different at this company in northeast Germany with 70 employees,

01:51which specializes in designing and manufacturing customized conveying systems.

01:58The insolvency administrator is documenting the company's assets,

02:02but the managing director has already secured an investor to help restructure the company and keep the business running.

02:11We need a capital injection, that much is clear. We need a backer with strong credit.

02:19An increasing number of entrepreneurs in Germany are under financial strain.

02:23For managers and employees, insolvency is a stressful experience.

02:29I can tell you the nights were short. Most of the time I had to work long hours.

02:34Then I usually slept badly or woke up early. It was an incredibly tough time.

02:41The causes of insolvency include labor shortages, inflation, bureaucratic costs

02:47and high energy prices since Russia's full-scale war against Ukraine.

02:53For example, before the war in 2021 and even through the end of 2022,

02:59our total energy costs were about 70,000 euros a year.

03:04By 2024, that figure had more than doubled to 146,000 euros.

03:12Our journey continues north, to the island of Usedom.

03:18Master carpenter Manfred Pohl has rescued a traditional business from insolvency.

03:24Korb-Vac is once again producing beach chairs, which are rented out to visitors in the summer.

03:30This luxury model costs 13,000 euros.

03:35We offer the option of incorporating a massage function, for example.

03:41You can choose different settings, different options, to get a massage while you're lounging in your chair.

03:48There are various drink options, for example here with a crushed ice tub to chill champagne.

03:55Perfect for a cozy time with your sweetheart.

03:59There's also integrated lighting right here, and a radio and a stereo system.

04:09The company had been burdened with debt, partly due to high energy costs and outdated machinery.

04:16But now its 13 employees are busy again and orders are coming in.

04:22When you've worked with beach chairs for so long, three decades in fact, you even dream about them at night.

04:29That's just how it is.

04:35Korb-Vac has benefitted from its new managing director,

04:39who has been working with the company for more than 20 years.

04:43Now his computer-controlled CNC milling machines and saws are also crafting parts for the beach chairs.

04:53The synergy between both companies is great,

04:56and it's a real pleasure to work with them again.

04:59It's a real pleasure to work with them again.

05:02It's a real pleasure to work with them again.

05:05It's a real pleasure to work with them again.

05:09The synergy between both companies is key.

05:12Beach chairs are 85% wood.

05:14What once took a full day to craft by hand, now takes just 18 minutes on the CNC machine.

05:20Then that part of the beach chair is done.

05:25Retaining all his employees is essential.

05:28A shortage of skilled labour would pose a serious risk to the business.

05:33Heating costs remain low, since the company burns its own wood waste.

05:37Pohl has personally invested several hundred thousand euros to modernize the factory.

05:48Any entrepreneur knows there's no such thing as guaranteed security.

05:52There's always risk.

05:54But we really liked and believed in this company,

05:57so we took the chance to bring it back to the top.

06:00Finally, he shows us the world's largest beach chair,

06:03built by his team and proudly displayed on the promenade.

06:07The next bathing season is around the corner,

06:09and Korbweck's signature beach chairs will be in high demand.

06:13So for some companies, there's a happy end.

06:16But for thousands of others,

06:18Germany's wave of insolvencies continues, with no clear end in sight.

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