The total number of bankruptcies and insolvencies of Polish companies reached 2,752 in 2022, up 30% y/y, according to a Coface report. The company expects the number of corporate insolvencies to rise, with the structure of insolvencies being fueled more by bankruptcies, i.e. liquidations of companies, than by restructurings.
The total number of 2,752 insolvencies of Polish companies in 2022 is 30% higher than in 2021, and we are seeing a sharp increase in the use of the out-of-court procedure (OCR). The total number of insolvencies consisted of court proceedings (whose share reached 37%) and out-of-court notices (63%), according to the Coface Annual Report: Insolvencies of Companies in Poland in 2022.
During the 12 months of 2022, the number of insolvencies confirmed out-of-court, using the new procedure in the National Register of Debtors, available as of 1.12.2021, exceeded the number of cases conducted in court by more than two-thirds:
* In all of 2022, the courts declared bankruptcy and restructuring orders for 1,029 Polish companies (according to data as of the end of December 2022), 10% more than in 2021.
* In addition, 1,723 so-called arrangement day notices (without court registration) were published in the National Debt Register – 45% more than in all of 2021.
“Among court proceedings:
* For the first time, proceedings for approval of an arrangement came to the top (520, up 59% year-on-year), the number of which grew dynamically due to the popularity of using the out-of-court procedure (OCC), following which the court announces this type of decision. Recall that in 2020 there were only 28 such proceedings, and in 2021 the number had already increased to 328.
* The number of liquidation bankruptcies declared most frequently to date has fallen by 12%.
* The number of accelerated arrangement proceedings decreased (from 132 in 2021 to 79 in 2022), which was also affected by the emergence of a new out-of-court procedure,” the statement reads.
Coface notes that 2022 brought an increase in insolvencies in almost all industries, reflecting the steadily worsening economic conditions for businesses. Transportation recorded the largest jump (+105 percent). We continue to see very large increases (in the range of 40%) in trade, construction and services. Statistics show that in the past year the problem of insolvency has not yet hit the manufacturing sector hard (up only 11%). The only branch that has seen a decline in the number of insolvencies is agriculture, which has seen a regular, dynamic increase in insolvencies in recent years.
Analyzing the legal forms of judicial and non-judicial insolvencies, we observe a continuing trend in which the number of insolvent entrepreneurs (more than 2/3) far exceeds the number of insolvent limited liability companies. (24%), which previously always had the highest number in the statements. This is due, among other things, to the fact that as many as 80% (1,380 cases) of the 1,723 total out-of-court notices in the NCR involved entrepreneurs (individuals engaged in business, including agriculture). This form has become very popular, and more and more entrepreneurs wishing to gain time in a difficult period for themselves decide to apply to the NCR for the announcement of the day of arrangement.
Although the insolvency of companies in Poland increased in 2022, in macroeconomic terms the year did not bring a dramatic deterioration in economic activity. However, Coface estimates that the coming 12 months will be much more challenging.
“Coface’s forecast assumes that GDP growth will reach just 1% this year. Nevertheless, the final months of 2022 have already confirmed the intensifying economic slowdown. This was reflected quite quickly on the business side with the aforementioned increase in corporate insolvencies. Although household consumption continued to support economic growth, the highest inflation in 26 years, the lowest level of consumer optimism, high interest rates and persistent uncertainty were already being felt by the trade industry, where insolvencies rose by as much as 57% in 2022. The deteriorating economy is also confirmed by the more than doubling of insolvencies in the transportation industry, which is usually the first to experience an improvement as well as a deterioration in demand and the economic situation,” Coface’s chief economist for Poland and Central Europe Grzegorz Sielewicz estimates.
Inflation will remain the No. 1 topic in 2023 as well, he noted. Although its peak should be recorded in the first quarter of the year, elevated price levels will also remain with us during and after 2023.
“The energy crisis that Europe is experiencing was responsible for a significant increase in inflation. Energy commodity prices began to rise even before the war in Ukraine, and its outbreak has further accelerated this process. Although Europe seems to be relatively prepared for the current winter in terms of necessary gas stocks, many companies will continue to use this raw material in the production process even after the winter, when both stocks and prices remain a big unknown,” the chief economist added.
Moreover, the next winter of 2023/2024 may be more challenging in this regard as infrastructure changes take time, even despite the many efforts of European countries in this regard, he pointed out.
“We expect that in the macroeconomic environment outlined above, the number of corporate insolvencies will increase, and their structure will unfortunately be fueled more by bankruptcies, i.e., the liquidation of companies, than by restructurings, which could lead to a return to effective business activity,” Sielewicz concluded.
Source: Coface and ISBnews
