Spain It closed October with an all-time high in bankruptcy proceedings and is on track to end 2024 with numbers unprecedented in the past five years. Last month ended with more than 905 companies in default of payments, the highest number in the entire series since it took effect. the reform of the bankruptcy law in September 2022 and this leads the country to accumulate so far this year, 5,911 competition applicationsalmost the same in ten months as all those recorded, for example, in 2021, when the economy had not yet fully recovered due to the Covid-19 pandemic.
On the table, countless factors explain these figures, despite the strong GDP growth, even if on the market they point towards a combination of three: the proximity of the end of the accounting moratorium, the high inflation of recent months and the balance sheets of companies loaded with debt.. Their combination has established itself on the positive trend that the economy is carrying with a growth rate significantly higher than the European average. For 2024, GDP growth of 3% is expected and for next year 2.1%, respectively.
Since the start of the year, according to Informa data, Competition is increasing in almost all sectors. The main increases are recorded in commerce (+172), followed by hotels (+113) and business services (+64). The only declines are observed in education (-3) and administration (-1). Commerce, for example, accounts for 26.32% of the total so far this year, while construction and real estate activities account for 18.41%.
Concerning the size of the companies concerned, Pere Vilella, Head of Bankruptcy at FTI&Partners, explains that “micro and small businesses have more difficulty accessing financing, they are still suffering from the COVID-19 crisis and tend to have a tighter balance sheet.”“. Vilella clarifies that “if it is true that the number of procedures has increased, it is also true that it has done so in a very specific type, that of competitions without mass. Within this category of competitions, there can be competitions of companies or individuals without commercial activity, and it is in this last type of competition that they played a major role.
The figures show that this month has no precedent since the year of the pandemic and, therefore, since the reform of the bankruptcy law. The regulatory change “meant greater agility in bankruptcy procedures for small and micro businesses. Before this reform, many of these businesses directly chose to lower the blinds and disappear.”explains Eduardo Frutos from the Kepler Karst office. “The reform has shortened deadlines and simplified procedures, which can be beneficial for creditors by allowing a faster resolution of their credits and for entrepreneurs who, in a few months, can resolve the closure of their business legally” ,” he adds.
Pre-bankruptcy situation
The bankruptcy x-ray shows another trend in pre-bankruptcies. Data extracted from the SABI platform shows that in Spain, more than 500 restructuring plans have already been registered since the law change.. During this period, restructuring plans decreased considerably in Catalonia and the Valencian Community.
In total, they reached 35.9% less in October than the same month last year and so far this year they reached 280, which is 7.89% less than in 2023. Regarding this situation, the market points to other factors, such as the slowness of traditional banks, the main creditors of Spanish companies, to recognize the problem and notice a deterioration.
Companies that do not resist
The ten months of the current financial year have left signs of the inability of large historical companies to avoid bankruptcy.. Data available from Informa through its monthly business demographics reports shows a sample of medium and large companies totaling more than $2.9 billion in annual revenue and more than 3,100 employees. The exhibition reveals well-known names such as those of different fishing companies (Tuna, Marpesca or Actemsa), which were put on the line after a general crisis in the sector in 2024.
The industry generally suffered from sharply rising costs and low demand due to high inflation, leading to an unprecedented decline in fish consumption. Another factor which worked against it is the narrowness of its margins (between 1.5% and 5% of its turnover).making them particularly susceptible to negative market fluctuations when they cannot pass on these impacts in their sales prices.
The retail sector was also hit hard, until it bought the iconic women’s shoe company Marypaz (Crocea Mors).which was relaunched years ago and avoided liquidation after welcoming new investors such as investment funds specializing in financially distressed companies.
Construction also remains affected. The Informa database includes the offer of Murias, a San Sebastián construction company of the Urbas group, or that of the Valencian construction company LIC (Levantina, Engineering and Construction).. This company based in Alberic (Valencia) had filed for pre-insolvency in November 2023 and declared that its risk of insolvency arose after recovery problems in Algeria, one of the countries in which it had taken the plunge internationally. Companies from industrial sectors such as aerospace also appear in the ranking. The most notable case is that of Elimco, weighed down by the debts of its parent company Ingemont.. The Sevillian company had explored a sale procedure before declaring its insolvency.
