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Number of insolvencies increased by 12% in first five months. Suspended activities – plus 31%, dissolutions – plus 59%

de Adrian N Ionescu , 2.7.2018

The increase in the number of companies and PFAs in insolvency was 11.97% in the first five months of this year, compared to the same period in 2017, up to 3,686, according to the data of National Trade Register Office (ONRC).

Although the rhythm declined in May (from over 17% in the first four months of the year), Romanian insolvencies remain well above the average of Central and Eastern Europe (CEE). In February, Romania’s figure was twice as high, according to Coface data.

“Champions”

Bucharest surpassed Bihor county, which was the leader in the company and PFA insolvencies in the first four months with 737 cases registered (plus 2.50% over the same period in 2017), according to Agerpres data.

Counties that follow:

  • Bihor – 237 (plus 22.16%),
  • Iasi – 213 (plus 4.41%) and
  • Timis – 181 (plus 27.46%) – also at the top of the ranking in the first four months.
  • In May alone, 721 firms and PFAs went into insolvency.

Trade is still the most crowded field with insolvencies (including the repair of motor vehicles and motorcycles), with 1,130 (plus 13.68%), of which 226 only in May.

The rhythm of activity suspensions increased by 30.81%, to 8,364 companies between January and May 2018, down from + 35% over the first four months. There were 1,406 activity suspensions only in May.

Dissolutions increased by 59.49% over the first five months, to 15,751 businesses, of which 3,098 were recorded in May.

Phenomenon

2017 brought 8,256 new insolvencies, up 3% compared to 2016, when 8,053 new procedures were registered.

Romania recorded an average insolvency rate of 2.4% per 1,000 active companies, which means almost twice the average of the Central and Eastern Europe, according to Coface.

“In this context, it is more important to assess the size of insolvent companies, in terms of financial losses caused to creditors and the social dimension, because of the jobs lost. From this perspective, 2017 saw a certain stabilization of insolvent companies with revenues above EUR 1 million, namely 326 companies, compared to 333 in the previous year,” according to the source mentioned.

However, losses caused to creditors by insolvent firms in 2017 amounted to RON 9.6 billion, up 13% year-on-year, or RON 8.5 billion.

On the other hand, the number of jobs reported by insolvent companies in 2017 amounts to 47,578, 32% lower than in the previous year.

The three major mistakes of companies that have suspended payments are:

  • poor financing of investments,
  • wrong investments and
  • an aggressive dividend policy.
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