A further decline in business failures in 2021

At the end of December 2021, with just over 27,600 collective procedures opened (receiverships, judicial liquidations, safeguard procedures), the number of claims for companies in metropolitan France appears to be at its lowest since 2014. After a record drop in 2020 (-38% for receiverships and judicial liquidations, -15.7% for safeguards), the year 2021 will accentuate the trend, with a further drop in the number of collective proceedings, between 12.5% and 14.5% over one year.

In the particularly difficult and chaotic context of the pandemic, the financial safeguards put in place by the State have therefore continued to bear fruit. Moreover, the gradual phasing out of aid and support, announced for the third quarter of 2021, remains largely deceptive, as the increase in the number of cases of infection has led to the maintenance of numerous targeted measures (partial activity, PGE, payment of social security contributions, solidarity funds, etc.).

The fear of a spike in insolvencies, faced with the wall of corporate debt, is temporarily receding, especially as the repayment periods for PGEs and social security contributions have been postponed for many small businesses, from 10 to 5 years. The approach of the presidential elections does not seem to be unrelated to these new relaxations.

In terms of business failures (receiverships and direct judicial liquidations), it is no surprise that very small businesses suffered the most in 2021, accounting for nearly 91% of receiverships and liquidations. SMEs, on the other hand, account for 9% of insolvencies. It should be noted that the latest entrants - companies less than 3 years old - recorded a 34% increase in insolvencies.

"The impacts of the pandemic have permanently disrupted the international economy and particularly maritime transport: explosion of container costs, delivery delays, disrupted or even halted logistic and production chains. With 90% of the goods we consume transiting by sea, the current tensions and our over-dependence on Asia are even more palpable..."

- Max Jammot, Head of the Economic Division at Ellisphere

Increase in proceedings and liquidations in the last quarter of 2021

In the details of the judgments processed by the registries in 2021, the number of operations has again increased over the last quarter. Thus, the number of judicial liquidation decisions is on the rise, and is back to the level observed at the beginning of 2021. More specifically, the number of conversions from recovery to liquidation is the highest of the year.

For their part, the number of openings of receiverships and safeguards is also rising. Furthermore, the duration of the procedures is tending to decrease; the number of renewals of the observation period is one of the lowest of the year. For the record, following its implementation by decree on October 18, 2021, the new crisis exit procedure has made its first emulation, with 15 operations in the last quarter. This procedure is aimed at small companies that have ceased payments but were operating under satisfactory conditions before the health crisis. This procedure allows the presentation of a draft plan for the continuation of the activity and is applicable until June 2, 2023.

As a corollary, in the last quarter, the number of favorable outcomes to procedures remains very limited. Recovery plans are the lowest in number for the year, unlike safeguard plans. Among the other judgments, we note a still significant number of homologations of conciliation, marking direct and targeted negotiations between creditors and debtors, as well as a relatively stable level of partial or total disposal plans.

Status quo in the regions and sectoral feedback

All regions have seen a decline in the number of business failures. However, resilience appears to be much lower in the Centre-Val de Loire, where the fall is only 1.1% compared to 2020. The Ile-de-France and PACA regions also show results below the national average, probably reflecting their heavy dependence on leisure and business tourism. Ile-de-France alone accounts for a quarter of business failures in France, followed by PACA and Auvergne-Rhône-Alpes with around 12% each.

By sector of activity, the situation is much more mixed. While in 2020, all sectors reported a sharp fall in the number of insolvencies, many of them have reached a low point and will thus see a resumption of their insolvency rate in 2021.

The Agriculture and Fishing sector, marked by climatic and economic events, recorded an increase of 9.5%.

Means of transport (construction and trading) were also affected, with insolvencies up by 7%, in a difficult context for civil aviation, which is still largely grounded, and for the automotive sector, which is caught up in the end of diesel fuel. Other sectors of activity have also been shaken by the rise in raw material prices, and by the persistent disruption of international transport. These include Metals (+4.5% of insolvencies), Industrial Equipment (+3%), and Wood, Paper & Printing (+1.4%).

As for the number of preventive safeguard measures, as in 2020, the decline remains smaller (-15%). The procedures are still mainly carried out by VSEs (70%). In 2021, the number of applications increased particularly in Hauts-de-France (+11.6%), and remained stable in the Grand Est, Normandy and Bourgogne-Franche-Comté. By sector, recourse to safeguarding has clearly increased in the metals sector (+ 140% of procedures), IT & Electronics (+ 64.3%), Agri-food (+ 50%), and Means of transport (+ 26%).

What to expect in 2022?

After an exceptional GDP growth of 7% in 2021, the government still forecasts a 4% GDP gain in 2022; a positive outlook for companies that will have been able to manage their cash flow with or without external financial contributions (such as State Guaranteed Loans - SGP).

Nearly 697,000 companies have taken out an EMP, including a large number of very small businesses, for a total amount of 143 billion euros. The first repayments of these EMPs are due in March 2022, which should have an impact on the cash flow of companies that have fully or partially used them, with a consequent increased risk of default.

Some companies could thus benefit from a new postponement to the end of 2022, and this over 10 years. They would be between 25,000 and 30,000, mainly shopkeepers, craftsmen and restaurant owners still affected by the covid measures.

In this election year, the difficulties of supply, recruitment, as well as the evolution of prices and purchasing power, will be at the center of all concerns, against the backdrop of a probable lightening of the pandemic hoped for in March...

What does this mean?

In 2022, the financial health of companies will depend on their ability to generate more wealth. This generation of wealth requires investments that must be financed and profitable. Investing is above all giving up immediate liquidity in the hope of future liquidity.

The morale of business leaders is therefore being closely scrutinized. The latest opinion polls on the mood of our SME / VSE managers are rather positive. Many more of them are considering an increase in their capital expenditure than a decrease. Equipment modernization is the main destination of their investment project.