Report: Insolvencies in 2024 Back to Pre-Pandemic Level

*141 high-impact companies entered insolvency last year, a 58% increase compared to 2023.   The number of companies that resorted to insolvency procedures in 2024 increased by over 9% compared to the previous year and reached 7,274, shows an analysis by CITR, a company active in the insolvency and restructuring market in Romania. Of these, 141 are impact companies, with assets of over 1 million euros, compared to 90 in the previous year. Regarding the number of applications for restructuring through the preventive composition procedure, they had a significant increase in 2024, of 118%, reaching 197.   These figures come in the context that in 2024, insolvencies at the global level register an accelerated growth with an estimate of +11% for the whole year, after a jump of +7% in 2023. Among the countries with an economic impact on Romania, the analysis mentions Germany, which recorded in the last quarter of last year the highest number of company insolvencies since 2009, with significant pressure on large industries, the negative evolution being partly attributed to the current economic crisis and the increase in the cost of energy and wages. The Romanian economy has faced challenges related to maintaining price stability and supporting economic growth, in the context of more restrictive financial conditions and weaker external demand, the analysis also shows.   “Although still below the levels of the 2008 global financial crisis, insolvencies in many countries, including the UK, France and Germany, have already exceeded pre-pandemic thresholds, reflecting increased economic pressures and the transition to new business models. This trend is felt in most regions and economic sectors, including Romania, also driven by the “elimination of infusions” offered to companies during the pandemic and the energy crisis. Insolvencies and requests for preventive concordat in 2024 in Romania show us that the business environment is also undergoing a transformation. The current outlook indicates an imminent wave of insolvencies, because many companies have been artificially kept alive through various support measures. These companies resort to recovery solutions when it is too late, which significantly reduces the chances of success. We recommend that companies turn to specialized solutions before the difficulties become insurmountable. Adaptability and strategic planning will make the difference in the coming period”, stated Paul-Dieter Cirlanaru, CEO of CITR.   The most affected sectors in 2024 were wholesale and retail trade, leading in 2024, with 1,902 insolvencies, up 6.79% compared to 2023, the construction sector, with 1,499 insolvencies, up 13.39% and the manufacturing industry, with 852 insolvencies, up 7.17% compared to the previous year. The most insolvencies opened in 2024 were registered in Bucharest (1,375) and in the counties of Bihor (581), Cluj (529) and Timis (424), which account for 40% of the total.   The highest percentage increases in insolvencies, reported by counties, are recorded in 2024 in Brasov, with an increase of 46.39%, followed by Botosani, where the number of insolvencies increased by 36.84%, and Bacau, with an advance of 35.78%. This trend could indicate a deterioration in economic conditions at regional level, affecting both large and dynamic counties (Brasov) and those with a more fragile economy (Botosani, Bacau). The phenomenon may be related to the increase in the cost of credit, the decrease in domestic demand or difficulties in the industrial and construction sectors.   197 requests for the opening of the preventive composition procedure were registered in 2024, compared to the 90 in 2023, an increase of over 118%. Of these, less than half were approved.   “While the increase in preventive composition requests is a positive thing, the number of those approved remains modest in relation to the economic situations that could benefit from this mechanism. This reflects a deep problem: recovery solutions are accessed too late, when the difficulty is too advanced to be treated with restructuring, and the next attempt at rescue is insolvency. Preventive composition can represent, if accessed at the beginning of the difficulty, an effective solution, allowing companies to restructure, maintaining their activity and jobs. At the same time, for the economy, the wider use of prevention mechanisms, such as preventive composition, can reduce the economic impact of insolvencies”, added Paul-Dieter Cirlanaru, CEO of CITR.   The analysis notes that inflation, although declining, continues to be fueled by rising fuel and food prices, as well as wage increases that put pressure on production costs. In addition, economic imbalances risk accelerating companies’ financial problems.