- Polish enterprises benefit only partially – and with a delay – from the rebound in economic activity (real GDP is expected to accelerate from +0.2% in 2023 to +2.2% in 2024 and +3.2% in 2025) due to structural reasons, in particular the low profitability of Polish companies and other factors, such as the slow pace of monetary policy easing).
- The specificity of insolvency in Poland according to industries – the largest increase in the number of insolvencies in construction and transport (especially in the first quarter). In the second quarter, the number of wholesale insolvencies increased.
- Industrial and services sector – the dynamics of insolvencies has decreased y/y, but the decline is single-digit, hence their number is still large compared to the situation 2-3 years ago, not to mention the situation before the beginning of the pandemic crisis.
- The reasons for the insolvency of Polish companies include: a decline in profitability (the rate of cost growth has decreased, but they are still high) and turnover.
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Allianz Trade now expects that the trend of increasing insolvencies will continue longer than previously expected (with a record number of 4,700 cases in 2024, i.e. +5% y/y). The current readings on the number of insolvencies in individual months suggest that the improvement in the economy is too slowly reflected in the condition of enterprises, as evidenced by their number in the first half of the year showing an increase of +7% y/y (2,403 cases), at the same time creating a base effect for result for the entire year 2024.
As a consequence, this will be the fifth consecutive year of an increase in the number of insolvencies of Polish companies, and thus a record series of insolvencies (both in terms of the scale of the increase and its duration).
Industries with an increase in insolvencies and those with "only" a high number of insolvencies
In the first quarter, the dynamics of insolvency increased the most in construction and transport, where low turnover (lack of new investments and transport volumes) is accompanied by constantly growing labor costs, exceeding 20% of their costs. At the end of the second quarter, the y/y growth rate of the number of insolvencies in these sectors slowed down, decreasing by 7-10 percentage points compared to the first quarter. In turn, the dynamics of insolvency in wholesale trade increased, reaching +20% y/y after the first half of the year.
Sławomir Bąk, member of the management board of Allianz Trade in Poland (photo: press materials)
– This does not contradict readings from the economy, which point to consumption as the main component of growth. The insolvent wholesalers were mostly related to the trade in investment and construction goods (wood, building materials, metal products, parts and machines) as well as consumer but durable goods – which have recently seen stagnant sales (furniture, interior furnishings, electronics, electronics/household appliances, clothing and footwear). In wholesale trade, we have recently had a group of insolvencies of the largest companies, although not that large (in June – turnover in the range of up to PLN 100 million), says Sławomir Bąk, member of the management board of Allianz Trade in Poland responsible for risk assessment.
In the production and services sectors, there has already been a y/y decline in the number of insolvencies, although so far it is single-digit and their number is still higher than in 2022 and earlier. Definitely higher – in the case of production, it is currently 3 times higher than in 2019 and 2020, and in the case of services, it is 5 times higher (vs. 2020) or even 7 times higher (vs. 2019).
Insolvency dynamics in individual regions
In fact, the problem of the scale of insolvent companies does not seem to be the greatest in the voivodeships with the highest percentage increase in the number of insolvencies y/y. The scale of increases results from a low base and they are in absolute terms up to a dozen more insolvencies year on year.
Hence, despite the y/y growth of "only" 9% y/y after the first half of the year, it is worth paying attention to Mazovia. What is important is not only the absolute numbers – the highest in the country – but their general consistency in May-June compared to other, economically developed voivodeships such as Małopolskie, Silesia or Pomerania, where the number of insolvencies was already decreasing in these months. For example, in Silesia, there was a significant increase in the number of insolvencies in March-April, after which there was a downward trend. It was similar in most other voivodeships.
However, as in Mazovia, it was the case in Greater Poland and the Opole region – currently, these three voivodeships are statistically at the highest risk of an increase in the number of insolvencies based on the number of official publications in recent weeks (possibly different, as more up-to-date data could be taken into account if applications for protection against creditors or including debt collection cases).
Common causes of insolvency throughout the economy
Among the many reasons for such a scale of insolvency of Polish companies, often of a nature specific to individual industries, I would point out two common to all and the most important. The first is a decline in profitability and the second is a decline in turnover, says Sławomir Bąk.
The slowdown in inflation has not caused the prices of energy and means of production to fall and remain low – no, they remain high, but producer prices often fall (or at most nominally do not increase) due to low demand and large inventories. Hence the low profitability of enterprises, not only Polish ones, but also European ones more broadly – not global ones, because enterprises in Asia or the USA did not experience such a high increase in energy prices, and they also have easier and therefore cheaper access to financing.
Low profitability is most specific to Europe, while the decline in global trade as a consequence of consumer savings is quite common.
– This prevents companies from compensating for lower profit margins with higher turnover. We are observing the opposite phenomenon: companies in Europe, including Poland, are limiting the scale of their operations, not leaving less profitable areas of activity "for later", they are looking for profitability not only by limiting sales and investments, but also by reducing employment – something they have avoided so far. They are reducing employment for two reasons: first of all, despite the expected shortage of employees in the near future, their financial reserves no longer allow them to maintain currently unprofitable jobs for longer, and secondly – the increase in labor costs is the most painful for companies, apart from the increase in energy and fuel prices (according to the Central Statistical Office). . When they are not accompanied by a similar increase in efficiency, companies have no choice – they have to reduce costs, including employment, to maintain liquidity – says Sławomir Bąk.
– I do not expect that the situation in Poland in terms of labor costs will change – regardless of the administrative increase in the minimum wage, low labor costs will no longer be an advantage for Polish entrepreneurs due to: the shrinking availability of employees, their mobility within the EU (including also refugees from Ukraine) as well as changes in the European economy itself towards higher added value – sums up Sławomir Bąk.
Insolvencies mainly in the SME sector, but large companies are also in trouble
In Poland, it is mainly companies from the SME sector that are still insolvent, as they are the worst at adapting the prices of their services or products to rising costs, as well as at the above-mentioned long-term switch to products and services with higher added value. In many areas, including the sectors of trade in basic necessities, services and food production, which are doing relatively well compared to the overall economy, a gradual concentration can be observed, with larger entities taking over market shares as they better optimize costs. There is no turning back from this phenomenon, just like from the above-mentioned higher labor costs – the weight of the economy will shift towards companies with, if not large, then at least medium-scale operations. There are currently no conditions in the economy to remain at the level of a startup or a sole proprietorship for years on such a scale as in previous decades due to the fundamental change in costs and availability of employees.
At the same time, on global markets we are observing a rapid increase in the number of insolvencies of large companies, including the largest ones – every day we dealt with at least one such insolvency, and there are definitely more of them than in recent years before the pandemic (in 2023 there were 365 such insolvencies in the world compared to 270 in 2022). It is an open question whether, also in Poland, the accumulation of problems of small companies and export recipients will not lead to a domino of insolvency of the larger ones before the expected market recovery at the end of the year or… next year. This year, shareholders of several dozen listed companies have had to decide on continuation of operations in the face of large losses in relation to capital – according to an analysis by Allianz Trade.
