2023, a dark year for business failures in France, construction and real estate on the front line

Key figures: the black picture of business failures in 2023 in France

• 55.492 companies are concerned by the opening of a safeguard, recovery or judicial liquidation procedure*. For the record and for comparison in 2010-2015: the Subprime crisis and the aftermath of the public debt crisis in Europe had brought defaults to more than 62.000 on average over several years.
• 37,2% increase for the 4th quarter of 2023 alone, i.e. 16.820 failing companies
• 37.000 jobs are at risk, the highest level recorded since 2016.
• 243.000 direct jobs which are or have been threatened in 2023
• SMEs with more than 100 employees experience the strongest increase
• 1 in 3 failures is located in Ile-de-France and Auvergne Rhône-Alpes with an increase in procedures of 38%.

* Source: Bank of France

Status report of the affected sectors of activity

These figures paint a grim picture of the fragile state of our businesses. This is even one of the worst fourth quarters in 30 years. Only the recession period of 1992-1993 had brought France to comparable thresholds for a final quarter. The proportion of SME-ETI (8,2%) is also at its highest since the 3rd quarter of 2010, the highest rate since the financial crisis, specifies a recent study*.

Among the most affected sectors in France:

• Real estate shows an increase of around + 40% knowing that real estate agencies record the worst trend (116,7%).
• Construction is also lagging far behind with 38,7%: more than 14.000 companies are failing, including nearly 11.000 in construction activities alone. 14.112 entrepreneurs have obtained the opening of a procedure. 10.990 were located in the structural work (4.140; + 44,1%) and the 2nd work (6.850; + 38,9%). General masonry (+2.779; +50,5%) and electrical installation work (1.161; +48,3%).
• Accommodation and catering, largely supported during the health crisis, is experiencing a sort of setback, with 44,6% failures. The weight of commercial leases weighs too heavily on the costs of establishments.

*Altarès study January 2024

The Île-de-France region very strongly impacted

Home territory for many head offices, Île-de-France (notably Hauts-de-Seine) is particularly affected: 12.653 procedures were opened in 2023, thus accounting for 22% of business failures. In total, the number of failures of companies with more than 50 employees in Ile-de-France increased by +53,3% between 2022 and 2023. Among the Ile-de-France sectors most affected:

• Accommodation and catering recorded an increase of +53,8% in judicial recovery openings; much greater failures in the catering sector (+57,5%).
• Ile-de-France real estate is the most affected sector with +59,9% in receivership.
• Construction is experiencing a higher increase (+44,8%) than the national increase (+38,7%).

This situation results from several often cumulative factors:

• Companies are facing structural problems because before the COVID period, many of them were already weakened.
• Economic difficulties (war in Ukraine and Israeli-Palestinian conflict) have had an impact on the increase in energy prices and are particularly affecting exporting companies.
• All companies are feeling the brunt of an increase in costs reducing their cash flow.
• The combination of low cash flow and persistent debt increases the risk of default.

The banking pressure is such that companies find themselves unable to renegotiate their loan despite the January 2022 agreement on the rescheduling of EMPs until December 31.12, 2023. They see their loan frozen or postponed and their financing capacity disappear. If VSEs are the most numerous to fail, 2023 has confirmed that SME and ETI business partners are, and should remain, also very exposed to risk. An entire ecosystem is seized up. The weakening of the cash flow of entire sectors and the lengthening of payment terms are causing chain failures. You need to know how to act as quickly as possible to contain the situation quickly.

The conciliation procedure then becomes the only way for companies to negotiate a bank loan but the procedures are so complex both psychologically and administratively that the decision is often postponed.

Helping businesses: Ile-de-France accounting experts

There are ways to protect yourself from these catastrophic situations. Accountants in Île-de-France play a decisive role in prevention. Their knowledge of the workings of companies allows them to detect warning signals (denunciation of overdrafts, organizational problems, loss of customers, etc.) and to put in place the right reflexes to support the company in implementing procedures. preventive (ad hoc mandate and conciliation) and safeguarding.

During sensitive phases (business creation less than 2 years old, transfer period, development phase) accountants pay increased attention. Their informed expertise is essential to detect possible management errors such as:

• inadequate strategic choice,
• lack of knowledge of cost prices,
• uncontrolled dashboard,
• disagreement between leaders,
• insufficient skills,
• weakness of the information system,
• inadequacy of the men-products-markets trio.

Their spectrum of analysis and their skills are broad. Financial difficulties will be scrutinized: inter-company credit, chronic undercapitalization, break in the cash flow cycle, poorly financed investment, structural losses, etc. The sooner the diagnosis is made, the more effective the solutions will be and the quicker the solution will be. recovery.

It is in this sense that the Order of Chartered Accountants of Île-de-France is organizing on February 29, a round table on the subject with its partners, the Paris Regional Company of Auditors and the Commercial Court of Paris.

For Virginie Roitman, president of the Order: “It is for each of our institutions to continue the evangelization of our professionals, accountants, CACs, lawyers, who have a monitoring, advisory and support role that is absolutely essential to prevent failures when they arise. still time. »

Illustrative image of the article via Depositphotos.com.