Germany's Corporate Insolvency Crisis: One in Three SMEs Highly Indebted
German corporate insolvencies hit their highest quarterly level since 2005 in Q2, with nearly one-third of small and mid-sized businesses highly indebted and vulnerable to downturns.
Newsnibs Staff
- 2026-10-09
- Updated 3:56 AM UTC
German courts registered 2,276 corporate insolvencies in April, up 7.1% from a year earlier, and the Leibniz Institute for Economic Research in Halle counted 4,996 insolvencies for the second quarter, the highest quarterly total since the second quarter of 2005. Creditreform, drawing on Federal Statistical Office data, says the country is on pace for its highest number of corporate bankruptcies since 2013 in the first half of 2026.
Creditreform attributes the wave to a lack of equity capital among German companies. By its figures, nearly one-third of small and mid-sized businesses have an equity ratio below 10%, meaning they are financed almost entirely by debt and have little buffer against a downturn.
Transport, hospitality and construction were hit hardest as of April. Transport recorded 43.9 insolvencies per 10,000 companies, hospitality 41.2, and construction 35.6.
The broader economy grew 0.3% in the second quarter, which Creditreform credits to higher exports. Patrik-Ludwig Hantzsch, head of economic research at Creditreform, said "the majority of companies are still facing excessive burdens," and the firm says a return to the country's former economic strength is a long way off.
Employment in the small and mid-sized business sector has stagnated for three years. Investment plans among those firms have fallen to a 20-year low, with only 37.3% of the 1,200 companies Creditreform surveyed planning to invest. In the same survey, 14.5% of companies added staff while 18.6% cut jobs.
The Federal Employment Agency paid about 1.6 billion euros in insolvency compensation in 2024 and expects to pay 1.8 billion euros in 2026.
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