According to a survey, France’s business failures rose sharply this summer.

During the crisis brought about by Covid-19, government support measures shielded vulnerable firms from its effects.

According to a report that was released on Monday by the specialized business Altares, the number of corporate insolvencies in France climbed at a record pace this summer. In France, “the return to pre-Covid norms is increasing,” according to the findings of the study. “With 8,950 insolvency proceedings opened between July 1 and September 30, the level of defaults increased by 69% compared to the summer of 2021, a rate not seen for 25 years,” noted the company that records all the openings of proceedings with the commercial courts. “With 8,950 insolvency proceedings opened between July 1 and September 30, the level of defaults increased by 69% compared to the summer of 2021.”

According to Altares, throughout a rolling period of 12 months, “the bar of 38,000 insolvency proceedings has been exceeded for the first time since the summer of 2020.” Altares also notes that this represents an “increase of 10,000 failures over one year,” but that it does not “bring France back to default levels of September 2019,” which consisted of 53,500 failures in one year.

This increase was especially notable for small and medium-sized businesses (SMEs) with 20 to 49 employees, whose number of defaults more than doubled over a year to reach 186 open procedures this summer. This number is getting close to the level that was seen in the summer of 2019, which was 193 procedures. When broken down by industry, the growth exceeded 200% in the fast food industry, reached 115% in internet sales, and reached 109% in the clothes industry. Food was the primary contributor to the industry's 85% growth, which led to 688 total defects. Food faults increased by 141%, totaling 297. The decline is also very considerable for hairdressing salons and beauty salons (+94%), but the increase in the number of failures in agriculture is limited to 11%.

Close to seventy-five percent of all judicial liquidations

According to Altares, “the PACA region seems to withstand the best,” while the loss percentage of enterprises in Hauts-de-France doubled, bringing the territory back to a scenario equal to that of 2019, while “the region seems to resist the best” in other regions. During the crisis that was known as Covid-19, fragile companies had been protected by government support measures such as relief or facilitation of payment of social security contributions and state-guaranteed loans (PGE), which supported their cash flow. These measures had been put in place to protect these companies.

As a result, the loss ratio that had been observed in the third quarter of 2021 had been the lowest that had ever been observed in the preceding 25 years. This time last year, almost three-quarters of the procedures opened with the commercial courts were direct judicial liquidations. This figure is greater than the 68 percent that it was before the health crisis. Legal reorganizations accounted for 24% of the total, while safeguard procedures are still low in number, even though their number (229) exceeds the level that they were at before the crisis.

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