Business bankruptcies fell again last year

A positive signal on the economic front: the corporate failures declined for the second consecutive year in 2017, through inter alia the improvement of the economic situation in the construction.

According to figures published Friday by the Bank of France, 54.572 companies have been the subject last year of a backup procedure, have been placed in receivership or put into liquidation last year, compared to 57.947 in 2016.

The number of business failures has declined 5.8% year on year. This evolution confirms the strong momentum in 2016 (-8%) and confirms the good health found of the French economy, after several poor years.

“We are on a tone positive, which is consistent with all of the economic indicators that we have”, stressed to AFP Denis Ferrand, director of the institute Coe-Rexecode.

In question, according to him: “the improvement of the economic situation”, but also “political measures” taken in recent years to improve the competitiveness of enterprises, to the image of the CICE and the Pact of responsibility.

According to the monetary institution, the largest drops in terms of failures have been recorded in the sectors of construction and real estate activities, with decreases in the number of failures of 11.6% and 16.9%.

The sector, very affected during the crisis, “is plumb, and the low interest rate environment has allowed real estate to restart”, commented to AFP Thierry Millon, director of research at Altares, a firm that also publishes studies on business failures.

The failures have also fell 7.7% in the areas of advice and services to companies, from 5.1% in accommodation and food services, and 3.6% in the trade and repair of motor vehicles.

Transport to the sentence

On the other hand, as in 2016, the sector of transportation and warehousing has been in a slump, with a increase of 5.1% failures. “It is a sector in difficulty for several years,” observes from the AFP Denis Ferrand, which explains the phenomenon by “strong competition” in which French companies are the victims, including at european level.

“The transport companies are also facing serious recruitment difficulties”, can be related to the fact “that these companies are not able to offer attractive salaries”, he says.

Agriculture and fishing also continued to suffer, with deficiencies in progression of 6%.

By size of enterprises, the failures have declined sharply for the small and medium-sized enterprises (-5,9%), despite a significant increase on the one segment of the small business sector (+10.3 per cent).

They have, however, increased for the enterprises of intermediary size (ETI) and large firms, with 46 failures recorded last year compared with 28 the previous year.

The rally may continue into 2018 ? “We can expect to have by the end of the year a movement that will continue, but not with the same strength,” says Thierry Millon, who points out that “trees do not grow to the sky”. “We’re going to without doubt end 2018 to around 52,000 failures, which is still below the level of 2007” before the crisis, it forecasts.

The manager also points to the fact that in a situation of economic recovery, companies, to cope with a surge of orders, must “further solicit their cash”, which can be a cause of failure for companies with less well-controlled.

And even if the failures continue to decline, the number of firms “zombies”, in other words, unprofitable, insolvent, debt-ridden, and maintained alive artificially by financing at low costs in a context of expansionary monetary policy, not decreases, according to a recent study by Coface.

(With AFP)

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