Looking forward, slowing growth, persistent geopolitical frictions and a delayed easing of financing conditions would push up corporate insolvencies by +2% in 2025 before stabilizing at high levels in 2026. In the US, we expect bankruptcies to increase by +12% in 2025 (reaching a total of 27,800 companies) before falling by -4% in 2026. In Germany, business insolvencies will increase by +4% to 23,000 companies before falling also by -4% in 2026. In France and the UK, the number of insolvencies will decrease slightly by -6% for both countries in 2025 to 63,000 and 27,480 companies filing for insolvency, respectively, and continue to decrease further by -3% and -4% in 2026. Meanwhile in Italy, liquidations will continue to rise by +4% in 2025 (representing 9,700 cases) and +3% in 2026. In China, business insolvencies will start to increase from low levels by +5% to 6,850 companies, and +6% in 2025 and 2026, respectively.
In 2025, the further rise in business insolvencies will put over 1.6mn jobs at risk in Europe and North America alone. This is calculated based on the share of companies that go into a liquidation phase immediately (65% on average) and the share of people laid off in a restructuring phase (around 35%). The main sectors at risk are construction, retail and services sectors. The jobs at risk are equivalent to close to 8% of the total number of people unemployed in Europe and the US and represent a 10-year high.
Lower interest rates are no silver bullet, likely to bring only moderate relief to corporates, with their positive impact at the highest level towards the end of 2025. We find the current easing cycle, which would end in September 2025 with a cumulative decrease in key rates close to -2pps, would lead to a -4pps reduction of insolvencies over the course of 2024-2026. This is particularly true in countries where companies have been protecting their margins; the same fall in rates comes with an up to +2pps improvement in margins for Germany, +4pps for France, +3pps for the UK and +2.8pps for the US, to name a few countries where we modelled the effect. Highly leveraged sectors such as household equipment, computers, auto and construction will benefit the most. But insolvency and non-payment risks will persist. Firms have already been deleveraging and adjusting to high rates, meaning the easing cycle may not fully address the financial challenges, only slightly offsetting the expected increase in failures in the US or barely reinforcing the expected decrease in France, for example. Moreover, there is still a significant share of corporate debt to mature in the next couple of years; about a third of lower-quality debt (i.e. high yield rated or unrated) is due to mature by 2026. Highly leveraged sectors will be increasingly distressed, keeping business insolvencies at high levels.
