Record High Insolvencies in Germany: A Grim Outlook Ahead

The trend of increasing insolvencies in Germany has continued unabated into March 2025, with a substantial rise observed across various sectors. According to a recent analysis from the Leibniz Institute for Economic Research in Halle (IWH), both March and the first quarter of this year have seen a significant surge in the number of insolvencies among both individual and corporate entities.

In March alone, German courts recorded 1,459 new corporate insolvency filings, marking a 2% increase from February. This figure reflects a staggering 12% rise compared to March 2024 and a dramatic 46% increase relative to the average number of insolvencies recorded in March during the pre-COVID years of 2016 to 2019.

The implications of these insolvencies are considerable, particularly for larger firms. The IWH's analysis indicates that more than 16,000 jobs were impacted during March within the top 10% of insolvent companies. While this number is 13% lower than February's figures, it still represents a 43% increase when compared to the same month last year. Furthermore, this current job loss figure is more than double the average from the years leading up to the pandemic.

The increase in insolvencies is not limited to March; the overall trend for the first quarter of 2025 also shows a 1% rise from the record highs that were set in the final quarter of 2024. This previous quarter was noted for having the highest insolvency rates since the global financial crisis of 2008-2009.

Steffen Müller, head of the IWH's insolvency research, has pointed out that the current high levels of insolvencies are not solely attributable to ongoing economic challenges. He noted that persistently low interest rates had previously mitigated insolvencies, and the financial support measures during the pandemic had masked the vulnerabilities of many businesses. With rising interest rates and the cessation of support measures beginning in 2022, the market is now experiencing a necessary correction, albeit a painful one, that allows for the emergence of more sustainable businesses.

In the first three months of 2025, a total of 4,237 individual and corporate insolvencies were recorded in Germany, with industrial sectors being the most adversely affected. However, detailed industry-specific data on insolvencies is not yet available from the Federal Statistical Office (Destatis).

Geographically, the highest number of insolvencies in March was reported in North Rhine-Westphalia, Germany's most populous federal state, with 339 cases. This was followed by Bavaria, which saw 204 new insolvencies, and Baden-Württemberg, where 147 new cases were filed.

Looking ahead, the Institute of the German Economy has provided a concerning forecast for 2025, predicting that up to 25,800 businesses could face insolvency before the year concludes. Should this prediction hold true, it would mark the fourth consecutive year of increasing insolvency rates, nearly doubling the number of insolvent companies compared to 2021.