Are we seeing a growth in the number of bankruptcies caused by the health crisis?

Question of the week

Contrary to what one might think, the Covid-19 crisis has translated into a historic drop in the number of business going bankrupt. This is due to the massive measures of support put in place by the majority of governments with the support of central banks.

In the United States, there were less than (1)150,000 corporate bankruptcies in the second and third trimesters of 2020. This is the lowest figure since before the 2008 crisis. In France, the monthly number of corporate bankruptcies also sunk at the beginning and at the end of 2020. Fewer than (2)2,000 monthly corporate bankruptcies were declared in Metropolitan France in April and May 2020, and the end of the year is close to similar statistics, as compared with an average of 4,000 monthly bankruptcies in ordinary times.

An increase in the number of bankruptcies is possible in the future, but government authorities will monitor and support that development. They will nonetheless have to avoid creating unprofitable “zombie businesses” kept afloat artificially.

See also :

Sources :

(1): Bloomberg

(2): Banque de France

The opinion expressed above is dated  25 January 2021, and liable to change.

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