The “whatever the cost” strategy has paid off. While the French economy has recorded a record recession not seen since World War II (-8.3% of GDP in 2020), the number of bankruptcies is also breaking records … but on the decline. “We have not experienced so few business failures in 30 years”, says Thierry Millon, director of studies at Altares, interviewed by franceinfo.
The number of companies saved since March 2020 compared to previous years is tens of thousands. An exceptional situation which cannot last. “At some point, the crisis will have to be expressed”, warns Lionel Nesta, economist at the Côte d’Azur University in Nice. Some experts predict “a wall of bankruptcy”, that is to say, bankruptcies in a very short period of time. Others, on the contrary, assert that the catching-up will be gradual and will be spread over several months or even years.
>> Covid-19: is France heading towards cascading bankruptcies with the end of “whatever the cost”?
To measure the extent of the current decline in bankruptcies, franceinfo has scrutinized the activity of commercial courts. It is in these courtrooms, where the bosses judge the bosses, that the future of companies in difficulty is played out. Thanks to open access data from the Official Bulletin of Civil and Commercial Announcements (Bodacc), we recorded the openings of receiverships and judicial liquidations *.
The companies concerned by these two types of procedures are said to be “in default”: they are in default of payment, that is to say they can no longer pay their invoices. Analysis of these data shows a significant and continuous drop in the number of procedures, mainly in the sectors most supported by the government.
Bankruptcies in free fall in 2020
The projection of the cumulative change in openings of procedures per year shows the extent of the dropout between 2020 and 2019. The two curves stand out from the week of March 17, that is to say at the time of the first confinement. The commercial courts were then closed, or confined to an extremely reduced activity. In May 2020, the failure curve starts to rise again. But the difference that was created during confinement is not made up. It on the contrary will continue to increase over the weeks. Finally, according to franceinfo’s count, the year 2020 ended with just over 24,000 bankruptcy filings against more than 40,000 in 2019, a decrease of 40%.
The decline is confirmed in 2021
Far from being absorbed, the sharp drop observed in 2020 continued in 2021, remaining at levels close to the lows traditionally observed in August of a normal year. At first, economists had blamed the drop in the number of bankruptcies on an administrative measure taken in the wake of the first confinement. Between March and August 2020, the government suspended the obligation to appear before the commercial court in the event of insolvency for all French companies. But the commercial courts did not fill up, even after the expiration of this “immunity” on August 24, 2020. Today, experts attribute the fall in the number of bankruptcies to two phenomena: state aid and the temporary end of legal summons by social security contribution collection organizations (Urssaf).
The sectors most supported by the State are the most spared by the procedures
In total, there were nearly 23,000 fewer failing company proceedings opened, including 13,000 in compulsory liquidation, between March 2020 and April 2021, taking 2019 as the reference year. Logically, the fall is particularly strong in the sectors most affected by health restrictions, and therefore the most supported by the State: 2,178 fewer judicial liquidations in accommodation and catering (-48.1%) and 3,894 less in commerce (-45.8%). Thus among the main beneficiaries of loans guaranteed by the State (PGE) are trade (32.7 billion euros), industry (22.1 billion) and construction (11.8 billion). Likewise, nearly half of the solidarity fund (over 28 billion euros) was distributed between the accommodation and catering (9.8 billion) and retail (3.7 billion) sectors.
A finding that does not concern large companies
In reality, the decline in bankruptcies mainly concerns small and medium-sized enterprises (SMEs) as well as individual entrepreneurs since it brings together around 99% of cases handled in commercial courts. On the other hand, it is quite different for larger companies (with more than 250 employees). With 260 insolvencies in 2020 against 182 in 2019, large employers were much more numerous in commercial courts. These companies notably include Camaïeu and La Halle in ready-to-wear, Presstalis in publishing and even the specialist distribution chain Bio C’Bon. These companies, already in bad shape at the start of 2020, found themselves all the more exposed during the pandemic.
* Methodological note: this work is based on open access data from the Official Bulletin of Civil and Commercial Announcements (Bodacc). In accordance with the recommendations of the Directorate of Legal and Administrative Information (Dila), only information indicating judgments of opening of insolvency proceedings were processed, these data being the most relevant for a comparison of the number of new proceedings over several years. These data were then cross-checked with the national system of identification and the directory of enterprises and their establishments (Sirene) managed by INSEE. Procedures concerning companies that are not part of the production system (as well as a large number of real estate companies) or associations of the 1901 law type have been excluded from the base studied.