Spain, the country in the world where business bankruptcies will grow the most compared to before the pandemic



Spain will lead the world in increasing business bankruptcies this year and in the global top ten in 2022. An increase that is explained by the slowdown in the recovery of the Spanish economy, with growth expectations that are not being met according to economists. “By lifting restrictions, a rapid recovery was expected to return to pre-first quarter 2020 levels, effectively saving thousands of ‘frozen’ businesses and jobs over several quarters. However, this dynamic is proving disappointing in economies such as Spain, which is still 5% below the level of March 2020, “experts from the Registry of Forensic Economists (Refor) of the General Council of Economists of Spain, during the presentation of its Bankruptcy Atlas 2021.

Although it should be noted that in proportion, Spain is one of the European countries with the fewest bankruptcy filings.

In fact, Spain is the country with the lowest bankruptcy ratio (insolvencies / number of companies) with 52 bankruptcies for every 10,000 companies, according to the Bankruptcy Atlas presented today. Although the extension of the health crisis due to the virus in 2021 shows an upward behavior of insolvencies. In the figures posted up to the third quarter, these experts point to a slight increase compared to 2020, reaching 3,169 insolvent companies, compared to the 3,131 bankrupt in the same period of the previous year. But in this evolution, we must take into account the normality of bankruptcy activity in practically the entire first quarter of last year, when the pandemic had not yet broken out and, therefore, there was no bankruptcy moratorium.

In any case, as is also the case at the European level, the bleeding of bankruptcies continues to be slowed down by the paralysis of the necessary competitions that will conclude on December 31st. In fact, despite the damage of the Covid-19 crisis to European economies, all countries registered a notable decrease in contests last year compared to before the pandemic. Namely, countries like Germany certified 9% less; France, 36%; also the United Kingdom (28%), Italy (33%) and Portugal (12%). However, in Spain they only contracted 3.3%.

During the presentation, the president of the General Council of Economists of Spain, Valentín Pich, wanted to make it clear that, so far, this crisis is different from the previous ones, since “the extraordinary measures implemented as ‘compensations’ to the productive sector due to the restrictions imposed by the pandemic (such as ERTE, ICO guarantees and some fiscal measures) they have broken the historical correlation between the economic cycle and bankruptcy proceedings ».

The Bankruptcy Atlas indicates that the recovery to the levels of March 2020 will take at least three or four more quarters to arrive, as long as there are no new surprises in the macro scenario. For economists, this growth delay is marked by factors such as bottlenecks in international trade, the risk of structural inflation, uncertainty in labor and fiscal regulations, the deterioration in credit conditions after ICO guarantees and the delay in the arrival of European funds.

It is five times the number of natural persons

In Refor, the bankruptcy registered during the pandemic in individuals is of particular concern, which shot up 35% in 2020. A figure that according to economists, between 2015 and 2020, has multiplied by six from 649 to 4032 insolvencies. In fact, 47% of the total contests presented in 2020 were in this figure.

For the Refor, this fact may be due to the fact that natural persons «have been the most vulnerable to the economic crisis derived from the pandemic, as well as the fact that the Supreme Court Judgment of July 2, 2019 has allowed a greater exemption from public credit in second opportunity”. Therefore, an increase in bankruptcies is foreseeable for this year and the next in this figure, both due to the effects of Covid-19, “as well as possible consequences derived from the increase in the price of energy, inflation and delays in the supply of certain raw materials’.

Bankruptcy reform

The Refor has also made an assessment of the Bankruptcy Reform Bill, which still leaves some doubts about its finality. For the president of the forensic economists, Juan Carlos Robles, there are still aspects in the regulation that could be improved «such as the excessive weight of the debtor’s role in the procedures for micro-enterprises, the step backwards in the mechanisms of second chance, the deregulation of the professionals of insolvency or the lack of effective testing to guarantee the full functioning of the new electronic procedure ”. Although it exposes in favor, improvements such as the mechanisms that it presents for detecting probable insolvency, the promotion of restructuring, the greater weight of the economic content in the management of insolvencies or that the powers in bankruptcies of natural persons have returned to the courts of the mercantile.

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