Business bankruptcies in Poland are on the rise this year. – There are so many risk factors in business today that for entrepreneurs, especially small and medium-sized ones, the situation has become unpredictable as never before – says Tomasz Starus, President of the Management Board of Allianz Trade in Poland. This can be seen in the company insolvency statistics.
Business bankruptcies up by 17 percent
In May, there were 17 percent of them. more than a year ago and as much as 150 percent. more than at the beginning of the pandemic. Throughout the year, their share may be 12 percent more on an annual basis, as in the countries of Western Europe, which are the main economic partner for Polish companies.
That is why domestic companies must now act in accordance with the principle of limited trust towards contractors, analyse their business partners more precisely and use tools to protect themselves against increased risk in business.
Very high uncertainty
– The greatest risk for Polish companies is currently the very high uncertainty resulting from inflation, rising commodity prices, a pandemic and broken supply chains. For each of the companies – especially small and medium-sized ones – this means a huge increase in risk, not fully predictable, because costs can grow day by day – says Tomasz Starus.
Polish companies have recently experienced three powerful external shocks: the beginning of the COVID-19 pandemic in 2020, its peak in April 2021 and the Russian invasion of Ukraine, which began in February this year.
As a result, for over two years domestic enterprises have been operating in a constant mode of uncertainty and increased risk. In a study by the Polish Economic Institute conducted at the beginning of March this year, i.e. shortly after the outbreak of the war across the eastern border, 42 percent of companies declared that they felt a great or very high risk to their activities.
– At present, small and medium-sized family enterprises, which have to compete in their markets just like all the big ones in the world, are most at risk. On the other hand, they have much less liquidity at their disposal, much less banking products, and much less ability to negotiate delivery prices and transfer higher costs to customers.
Therefore, they have to rely on their own capital to a much greater extent and often, in order to maintain sales, they do so at the expense of their own margin in order to stay on the market – says the president of Allianz Trade in Poland.
The head of the largest company insuring receivables notices that in Poland the problem of payment gridlocks is becoming more and more visible, although it is not yet on a mass scale. However, delays in payments are felt most strongly by small and medium-sized enterprises – for them, often one invoice not settled on time may disturb their financial liquidity.
– We are seeing a gradual worsening of payments and it depends on the sector. It most affects those directly exposed to the increase in energy costs, i.e. the transport sector, but also energy-intensive production segments.
There, the total payment period, i.e. the one resulting from the invoice plus the delayed one, slowly begins to lengthen. It is not mass-produced yet, but compared to last year, we see an increased number of cases in debt collection. It mainly affects small and medium-sized enterprises – says Tomasz Starus.
Importantly, the increase in unpredictability and risk in business is also reflected in the number of insolvencies of Polish companies, which in May, according to Allianz Trade data, were by 17 percent. higher than last year and by as much as 150 percent. higher than at the beginning of the pandemic in 2020.
In addition to the sharp increase in insolvencies in construction on a monthly basis, the situation has also worsened in all other sectors, including in the food, manufacturing and wholesale trade. May was the first month of increases, but earlier decreases resulted from changes in the law and indicated fewer restructurings, not bankruptcies.
– At the end of last year, there was a change in the law, and therefore it is now a bit more difficult to enter the remedial procedure than before, during pandemic loosening. On the other hand, the number of bankruptcies remains at the same level. However, May was the first month of this year when the number of insolvencies – that is, bankruptcies and restructuring combined – exceeded last year’s results. We expect that by the end of this year in Poland it will fall by more or less 12 percent. more companies than in the previous year – forecasts the president of Allianz Trade in Poland.
Also a a global problem
According to the forecasts of the receivables insurer, a similar trend will be visible this year on a global scale. Worldwide, the number of bankruptcies is expected to increase by approx. 10% this year, while in Western Europe, i.e. the main market for Polish companies, this increase will even reach approx. 14%. y/y It is true that recovering debts in the countries of the Old Continent is relatively simple compared to many other markets, but it still requires quick action and appropriate preparations. The basis is checking the credibility of the contractor, requesting prepayment and trade credit insurance.
– One of the tools entrepreneurs should implement in their companies is insurance of receivables and the debt collection procedure. We have modified the first of these products to suit small businesses where the policy administration process, policy costs and complexity play an important role in the decision-making process.
Therefore, we have implemented the SME Driver product, which is cheaper than similar products for large companies, much less complicated and much faster than the contracting process. In fact, it is possible to conclude an insurance contract at the first meeting and secure the company, especially now – in a very unpredictable and uncertain period – says Tomasz Starus.