In the 4th quarter of 2024 alone, 17.966 bankruptcies were counted by BPCE L'Observatoire. This record number of bankruptcies and their economic consequences, particularly in terms of jobs, constitute a warning for economic and political players, at the turn of a year 2025 which already promises to be difficult on the economic level and uncertain on the political and budgetary level.
An economic context that remains difficult for businesses
The economic environment for businesses is deteriorating with a slowdown in private salaried employment (+47.000 per year in Q3 2024) and moderate economic growth (+1,1% in 2023 and 2024). However, activity is mainly driven by public spending and foreign trade, while VSEs and SMEs depend mainly on private domestic demand, which is sluggish in 2024 with weak growth in consumption and sharply declining investment.
The persistence of inflation in services, mainly of wage origin, has weighed mainly on the margins of the service sectors and postponed the reduction of key rates. Since mid-2023, the increase in financing costs has weighed on their profits, which fell to a historically low level in 2024, and limited demand in certain sectors (real estate and construction). The decline in long-term rates in France, and therefore in corporate financing costs, is also hampered by the state of public finances.
Nevertheless, VSEs and SMEs seem particularly weakened by economic activity and more constrained margins than in large companies, and the scars of previous shocks (covid, energy prices and wage increases in particular) are still present for many of them. Also, uncertainty in terms of economic policy weighs on companies' investment expectations, already down for several quarters: 56% of VSE-SME managers believe that political uncertainty has a strong impact on their company's activity, so much so that one in two companies plans to postpone its investment projects and 2% intend to cancel them (BPI-Rexecode).
SMEs and many sectors are particularly affected!
In this context, the rise in business failures has accelerated further in 2024. BPCE L'Observatoire counts 17.966 failures in the 4th quarter of 2024, the highest level for a 4th quarter since 2009. In total, the number of failures reached 66.422 units in France over the whole of 2024 (+28% compared to 2019; +17% compared to 2023).
Numerically, this is a record compared to the last 15 years, exceeding in particular the high levels of the period 2010-2015. However, given the abnormally low number of failures between 2020 and 2022, this record of 2024, after the high level of 2023, in fact only corresponds to the partial catch-up (37%) of the approximately 53.500 failures avoided during the health crisis (taking 2019 as the reference year).
On the other hand, beyond the total number of defaults, the 2024 report confirms other warning indicators, already perceptible previously, according to Alain Tourdjman, director of economic studies at BPCE, and Julien Laugier, economist at BPCE:
- The phenomenon of catching up on failures avoided between 2020 and 2022 is in fact very heterogeneous. From 27% for entities with fewer than 3 employees, the "catch-up" of failures avoided by the "whatever it takes" approach reaches 100% for SMEs and mid-cap companies (10 employees or more). In other words, statistically, all SME failures avoided from 2020 to 2022 thanks to support mechanisms have finally occurred since 2023. This phenomenon is particularly noticeable for companies belonging to the so-called S1 sector, which includes the activities most exposed to the effects of the health crisis and therefore those that have been more supported by public action: the rebound in failures after 2022 was significantly more marked for entities with more than 5 employees than for very small structures.
- Generally speaking, we observe 3 different situations depending on the workforce:
- In 2024, 5.265 SMEs and mid-caps (10 employees or more) went bankrupt, compared to 3.478 in 2019, an increase of 51%. Statistically, the SME and mid-cap failures avoided from 2020 to 2022 will only have been postponed to 2023-2024.
- For entities employing 3 to 9 employees, the increase in insolvencies compared to 2019 was 31% with only a partial recovery of insolvencies avoided between 2020 and 2022.
- Microenterprises and VSEs with fewer than 3 employees are experiencing a less significant increase in defaults compared to 2019 (+25%) but have recorded a more marked acceleration over the past year, whereas they were previously less vulnerable.
- As the analysis by size suggests, the high level of failures cannot be explained by the recent increase in the number of new businesses, most often without employees. Thus, recent creations (less than 3 years of seniority) now represent only 18% of failures in 2024 compared to 24% and 23% in 2015 and 2019 respectively. The increase in failures has much more affected companies with 6 to 10 years of seniority, or even more.
- The measurement of the number of jobs at risk, which makes it possible to assess the economic weight of failures, is stabilizing at a very high level with 260.000 jobs exposed, or 41% beyond 2019.
- The sectoral differences are very marked. Traditionally, the industry, construction and trade sectors are the most impacted and account for more than half of the jobs at risk. However, the deterioration observed in 2023 and 2024 compared to 2019 highlights 6 sectors whose exposure has significantly increased: construction and trade, but also real estate, accommodation and catering, business services and household services. Among these sectors, the situation is more worrying for accommodation and catering and especially for construction and real estate, where the jobs at risk represent between 2% and 3,5% of salaried jobs in the sector.
- The territorial approach distinguishes 5 regions, mainly in the North-East quarter, relatively spared with increases in insolvencies of less than 15% between 2019 and 2024 (Lorraine, Champagne-Ardenne, Limousin, Franche-Comté and Alsace) and 5 very affected regions, mainly in the South-West and in very densely populated areas, with increases of between +34% and +43% (Aquitaine, Midi-Pyrénées, Ile-de-France, Poitou-Charentes and Rhône-Alpes). Concerning the larger entities (6 employees and more), the differences are even more significant between Limousin and Champagne-Ardenne (5 to 7% increase in defaults) and Poitou-Charentes or Aquitaine (respectively +101% and +87%). Upper Normandy and Picardy also stand out with a sharp rise in bankruptcies (respectively +74% and +66%).
Towards 68.000 bankruptcies in 2025 and 240.000 jobs threatened according to our forecasts
BPCE L'Observatoire predicts a new increase in insolvencies in 2025, around 68.000 events, a historically very high level, and 240.000 jobs would be threatened by insolvencies in 2025 according to Alain Tourdjman and Julien Laugier. On the other hand, unlike the last two years, this increase would be mainly explained by small entities, with defaults stabilizing for SMEs and ETIs.
This forecast is part of an environment in 2025 that will see several potentially harmful effects for businesses overlap: (i) economic growth would remain very limited (below 1%) and should destroy jobs according to the Banque de France; (ii) the continuation of PGE repayments and the normalization of Urssaf collections; (iii) a risk of increased wait-and-see attitude by households and businesses that will depend on the degree of political uncertainty and budgetary policy; (iv) a limited decline in financing costs.
These factors are expected to particularly affect small entities, especially the second point. As already seen in the fourth quarter of 2024, failures of entities with fewer than 3 employees are expected to accelerate. On the other hand, on the SME and ETI side, their number could decline, with the catch-up of failures avoided during the period 2020 to 2022 already having been achieved, in particular for structures weakened during the health crisis (sector S1).
*From the data extracted and reprocessed by our economists, BPCE L'Observatoire is now able to provide a very detailed statistical and economic analysis of business failures.
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