In 2020, a year marred by the crisis caused by the coronavirus pandemic, the number of company insolvencies was just 5,564, 13% lower than 6,384 insolvencies reported in 2019.
“Last year revealed an atypical and paradoxical mix for the business environment. Measures on social distancing in the context of the Covid-19 pandemic have generated significant negative effects on the business environment. Despite this, insolvencies have decreased to an all-time low and the business regeneration ratio looks good, recording the fewest business interruptions compared to newly registered companies. On one hand, this development shows the high effectiveness of support measures, which must be gradually migrated from subsidy to investment incentives and facilitating access to capital. On the other hand, I believe that this year will bring additional challenges for the return to widespread growth of companies, due to additional indebtedness, the rollover of last year’s frozen loans and wage pressures”, declared Iancu Guda, Services Director, Coface Romania.
Financial losses caused by insolvent companies in 2020 reached almost RON3 billion, 5 times below the level reported in 2015 and the lowest in the last 10 years. At the same time, the number of jobs reported by insolvent companies in 2020 is below the 20,000 threshold for the first time in the last decade.
Also, there is a gradual decrease in the number of insolvent companies with revenues over EUR0.5 million (medium and large), reaching only 301 companies in 2020, compared with 444 in 2019. In addition, Romania registered only 16 insolvent companies for each 1,000 companies with revenues over EUR1,000/month (active companies). Thus, Romania is nearing the regional average from the perspective of insolvencies reported to 1,000 active companies, respectively 11, after continuously leading this regional ranking in the last decade.
Most insolvencies in 2020 were registered in the wholesale and distribution sector (905), followed by construction (810) and retail (807). The share held by the top three sectors that registered the most insolvencies ranged between 50% and 54% over the last five years, and between 65% and 70% for the top five sectors.
When analyzing the number of insolvencies compared to the total number of active companies in the respective sector, a series of atypical evolutions can be observed. The most affected sector is the manufacturing of textiles, clothing and footwear, which recorded an insolvency rate of 64 companies per 1,000 active companies, four times the national average. The construction sector holds the top spot in terms of insolvencies related to active companies, although it registers an increase of almost 20% in the volume of construction, as well as new loans granted to the population for home purchase.
The HoReCa (hotel, restaurant, catering) industry registered 447 company insolvencies, 15% fewer than in 2019, which is also a paradox, considering that the hospitality industry has been hit hard by the pandemic. Coface analysts said this is due to the fact that most companies in the industry were not shut down, but they only froze their activity.