CEE region bankruptcy rate rise in 2013

The CEE region saw a record number of bankruptcies declared in 2013 due to falling investment in the construction sector, the economic slowdown and a lack of investment in new technologies and machinery, according to a report by Coface, a credit insurance provider.

“Throughout 2013, we have observed the highest increase in bankruptcies in the manufacturing sector,” Coface reported. “The main cause for insolvency is the decrease in revenues which affected the profitability of operations, and in consequence resulted in a more restrictive policy of financial institutions and more problems in the access to operations funding for many companies.”

The number of companies that ceased trading due to bankruptcy in Bulgaria, Romania, the Czech Republic, Poland, Croatia, Slovenia, Serbia, Slovakia, Latvia and Lithuania, reached 70,000 in 2013, which is 5 percent higher comparing to 2012, the Polish business daily Biznes.pl wrote.

According to the report, the least affected by insolvency were companies from the IT, educational and healthcare-related sectors. The most vulnerable sectors appeared to be construction, wholesale and retail.

The highest bankruptcy rate increase was seen in Bulgaria at almost 39 percent. Eight hundred and thirty four companies went bankrupt in 2013 due to the lack of government assistance programs, according to the Coface report.

Latvia showed the most positive results where the number of insolvencies decreased by 7 percent: where 612 companies registered in the country went bankrupt. Recently, Latvia became the fastest growing economy in the European Union, Coface noted.

The European Commission has estimated that the half of companies functioned for less than five years before going bankrupt.

Each year about 200,000 companies cease trading due to bankruptcy in the EU, Biznes.pl wrote.