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The number of firms in difficulty has increased by more than 30.000 over the past two years
The number of companies in financial difficulty has increased with over 30,000 over the last two years, the biggest problems being recorded in trade, distribution and constructions, shows an analysis of Sierra Quadrant, made on the basis of the official data in the Trade Register.
According to the quoted source, 83,200 businesses were at the beginning of this autum in insolvency, in procedures of cancellation, dissolution or suspension of activity, an extremely strong signal regarding the effects of inflation and the decrease in consumption for the Romanian economy.
Compared to the first eight months of last year, the number of businesses with issues has increased by 9,835. Compared to 2020, the statistics indicate a plus of 23,233 businesses in financial difficulty.
According to the data in the Trade Register, analysed by the experts of Sierra Quadrant, the number of dissolved companies has increased by 19.22%, at 23,016, that of written off businesses with 9.6% (46,304) and that of the companies with suspended activity with 20.4% (9598).
Similarly, during the same interval, 4,282 companies and PFAs went into insolvency, with 11.2% more than in 2021.
‘In only four months,the number of businesses in financial difficulty doubled, and the perspective of 2022 shows that, in the next six months, we could have a record of 130,000 businesses with issues’ the Sierra Quadrant analysis shows.
At the same time, trade has generated, in the first eight months of this year, most businesses with difficulties – 23,402.
Second were constructions, with 7910 businesses in difficulty. The number of cases of insolvency of this sector increased, for example, by 30% at 832.
Manufacturing reported, on the other hand, 7,016 companies in the risk area, out of which a number of 554 insolvencies (+14.4%), 691 suspension of activity (+22.5%), 3752 write-offs (+10.8%) and 2019 business dissolutions (+19.4%).
Due to the increase in logistics costs, the sector of transport and storage recorded a higher number of companies in difficulty, 6,580.
On the other hand, 391 got into insolvency (+24.5%), 737 suspended their activity (+43.6%), 3,629 were written-off (24.5%) and another 1,823 were dissolved (+ 43%).
According to the experts in Sierra Quadrant, the dynamics of the business is more and more influenced by the evolution of inflation, increased in the financial blockage and the drop in sales.
According to the estimates of the company, it is not unlikely that, due to the acceleration of the economic issues, the number of companies which will stop their activity during winter (insolvency,write-off, dissolved, suspension of activity) reach the maximum of the last three years, over 130,000 companies.
Due to inflation, the most important of the last 19 years, many companies were unable to develop their business in optimal conditions, especially through supplier loan, which was reduced significantly.
According to the experts, a major sign of worry, beyond the negative dynamics in trade, is the negative evolution of the constructions sector, affected by the increase in prices for constructions materials and restriction of access to loans for the Romanians.
Sierra Quadrant estimates that among the constructions companies and real estate development companies we will see many of the companies to get into payment incapacity in 2023.
Beyond commerce, constructions and transport and storage, the situation in the production area is worrying. The increase in price for utilities and raw materials has brought significant issues in the production chains. So, the prices in industrial production, the prices at the factory gate as they are known, are 60% higher, and the effects were visible and will be visible in the drop of orders.
According to the market estimates, it is not unlikely that Quarter IV be one of economic drop and QI of 2023 confirm Romania’s technical recession.
According to specialists, lack of trust in the economy is more and more obvious in the financial blockage, the dynamics of payments.
The unwillingness of the companies to open new business lines has increased during this quarter and risks to extend over the next six months, due to the challenges generated by the cold season.
Inflation, increase of lending costs, financial blockage and drop in consumption will put pressure on the performance of the Romanian companies.