Title: German Company Default Rates Hit Decade Highs: Here's What's Driving the Crisis
Germany's bankruptcy rate escalates towards a critical point
In a sobering turn of events, Germany's economic health is under the scanner, with a staggering surge in the number of companies failing to meet their financial obligations. This default rate, according to Creditreform Rating, has climbed to its highest level in over a decade, with a continuation of this trend in the forecast for 2025.
By the Numbers: Last year, the rating agency recorded the highest default rate of German companies since 2013, with a spike from 1.49% to 1.78%. The current level, the highest since 2013, is poised to surpass 2% by 2025 - a grim figure last seen during the global financial crisis in 2008 and 2009.
The grim picture is further painted in the "Default Study" by Creditreform Rating. A default occurs when a company or self-employed individual is unable to meet their payment obligations, as indicated by Creditreform information. The poor economic situation in Germany has been the primary trigger of this unwelcome spike. As Benjamin Mohr, a member of the management board of Creditreform Rating, points out, factors such as weak investment, structural issues in industry, and external economic pressures, such as U.S. tariffs, have been instrumental in this upward trend.
Smaller Companies Battle the Brunt: Despite economists predicting only minimal economic growth in Germany this year, they caution that further payment defaults are not off the table. Short-term stabilizing effects like reduced inflation or an end to interest rate hikes are insufficient in stemming the rising default risks, Mohr warns. The default rate is expected to remain on the rise for the time being.
Age and Size Matter: defaults among German firms vary significantly depending on their age and size. Young businesses (between two and five years old) are hardest hit, with a default rate of 3.66%. In contrast, established companies (those that have been around for more than ten years) exhibit a default rate of just over 1%. Businesses with an annual turnover between 500,000 and 2 million euros have a default rate almost double that of large companies (with a turnover of at least 250 million euros).
The transport and logistics sector has the highest default rate, at 3.37%, followed closely by the beleaguered construction industry (2.30%). The basic chemical industry, however, boasts a default rate below 1%.
European Trends: While specific data on German companies is not available, European trends and insights from banking statistics shed light on broader trends. The trailing-12-month (TTM) leveraged loan default rate in Europe reached 1.6% in April 2025, with a further rise expected. Meanwhile, the high-yield bond default rate remained at 3.7% during the same period. For speculative-grade (riskier) European companies, the default rate is forecasted to ease slightly from 4.1% (March 2025) to 3.6% by March 2026.
Key Factors: Rising funding costs, macroeconomic uncertainty, sectoral strains, credit supply dynamics, and small and young business vulnerabilities are the primary drivers behind the prevailing default and insolvency trends in both Germany and Europe.
In Summary: While specific German default rates are not isolated in recent reports, European trends and German regulatory commentary indicate a worrying rise in corporate insolvencies and non-performing loans, with small and young businesses particularly vulnerable due to higher funding costs, sectoral pressures, and macroeconomic uncertainty. The projected easing in speculative-grade defaults is conditional on financial conditions and the ability of firms to manage elevated debt costs.
[1] N/A, N/A, "Default Study 2024 by Creditreform Rating AG," accessed April 26, 2025.
[2] N/A, N/A, "Global Credit Market Review: January – March 2025," accessed April 26, 2025.
[3] N/A, N/A, "Leveraged Loans and Syndicated Loans: Default and Distress Monitor," accessed April 26, 2025.
[4] Bundesbank, N/A, "Statistical Zone.biz: Economy," accessed April 26, 2025.
[5] Bundesanstalt für Finanzdienstleistungsaufsicht (BAFin), N/A, "Financial Stability Report – June 2024," accessed April 26, 2025.
- In the midst of this corporate crisis in Germany, it would be prudent for companies to review their community policy and employment policies, ensuring financial stability for their employees during these trying times.
- With the finance sector experiencing instability, it's crucial for businesses to assess their financial standing and implement measures to mitigate risks, aligning with the larger employment policy for a secure business environment.
