Retail and construction failures drive rebound in large corporate failures

Major insolvencies have rebounded as retail and construction accounted for more than a quarter of world’s large corporate failures in Q3 2019, according to Euler Hermes, the world’s leading trade credit insurance provider.

The insurer’s findings on global corporate insolvencies with turnover exceeding EUR50m show there was an increase between July and September from 74 to 85 cases (Q2-Q3 2019).

While the number of insolvencies recorded in the first nine months of the year (249) was stable compared to the same period in 2018 (248), the combined turnover of the businesses that failed in Q1-Q3 increased by +37% year-on-year, reaching EUR145.2bn.

The research shows that the retail industry contributed the largest share of major insolvencies seen around the world over the last quarter with 37 cases, followed by construction (33) and services (27). The energy sector witnessed the largest rise in cases (+9) compared to the same period last year.

Western Europe remained the primary contributor to the level of major insolvencies in Q3 3019 with 104 cases, compared to 64 for Asia and 51 for North America. Retail and services in Western Europe were identified as the worst performing areas globally in terms of the volume of corporate failures.

Maxime Lemerle, head of sector and insolvency research at Euler Hermes, said: “The rise in large corporate failures globally is a symptom of the economic slowdown we’ve witnessed this year.

“High levels of debt, increasing input prices, digital disruption and falling consumer spending have had a significant impact on a range of sectors, particularly retail and services in Western Europe and the construction industry in Asia-Pacific.

“While we expect global GDP and trade growth to pick up in 2020, the recovery will be muted and a significant fall in the level of major insolvencies is unlikely. Despite the prospect of an agreement to bring the US and China trade war to an end, growing protectionism elsewhere and a busy political calendar will create more volatility.”