More than 14.000 business failures in construction in 2023: France records one of the worst 4th quarters in 30 years

The last quarter of 2023 alone further illustrates the current difficulties of economic players with 16.800 companies in default, the highest since 2012 - 2013. Previously, only the recession period of 1992-1993 had brought France to comparable thresholds for a last quarter. The country then passed the milestone of 60.000 bankruptcies for the first time in its history.

Given the unprecedented context of “permacrisis” in which companies have been navigating for 4 years, the failure thresholds, although high, are not a surprise.

For Thierry Millon, director of studies at Altares: “After a phase of catching up for some of the companies kept afloat thanks to the support measures put in place since the Covid crisis, we are now entering a new phase, more structural, more linked to the financial inadequacies of companies which must navigate an extraordinarily tense economic environment. The poor figure for the last quarter of the year, one of the worst in thirty years, cannot be explained solely by the return of more usual recovery action by URSSAF after a long accommodating period. Certainly the assignments resumed strongly at the end of the year but not all procedures are opened at the initiative of the URSSAF. Activity at half mast, inflation levels still high, interest rates still high, consumption faltering, form a dangerous cocktail for companies with depleted cash flow after a succession of crises. Even the largest players are not spared, potentially transferring the risk to their suppliers and subcontractors. 171 companies with at least 100 employees failed in 2023, this is 80% more than in 2022 and the highest number since 2014 (185 defaults). »

Benchmark: Where does 2023 compare to historic default levels? The period of the health crisis and the historic freezing of collective procedures created a before/after in the insolvency curve in France. While 2023 ends with very high default thresholds, France had already experienced levels exceeding 55.000 or even 60.000 over the last 30 years.

• 1992 – 1993: the oil shock and the historic recession experienced by France caused an explosion in the business fabric. For the first time, the country is experiencing more than 60.000 defects per year.
• 2010-2015: the subprime crisis and the aftermath of the public debt crisis in Europe (Greece, etc.) brought the level of defaults to more than 62.000 on average over several years.
• 2023, and its 57.700 defects, is therefore well beyond the period of the pre-Covid years but still far from the post-financial crisis years... between two waters.

A volume of failures in line with forecasts

With 57.729 procedures recorded, the volume of failures returned to the levels observed in January 2017 (57.900). A situation consistent with Altares’ forecasts. The increase over one year (+35,8%) is less strong than the exceptional increase in 2022 (+49%), but remains the second fastest in history.

The trend was even more severe in the last quarter (+37,2%) with 16.820 procedures opened. This time it is one of the worst figures in thirty years, comparable to those of 1992-1993 but lower than those of 2012-2013 at over 17.000.

Number of business failures by type of procedure per year

Sharp increase in judicial recovery openings

With 1.529 (+ 35,9%) judgments handed down in 2023, the number of safeguard procedures returned to its 2015 level but still represents less than 3% of all procedures. Since its implementation in 2006, this preventive system reserved only for companies not in default of payments has attracted only 21.000 managers while 973.000 procedures were opened, or less than 2,2% on average over 18 years.

Judicial recovery (RJ) procedures are increasing more quickly. 15.115 judgments were handed down, i.e. 49,2% more over one year. More than one in four judgments (26,2%) is an opening of RJ, the best rate since Covid but still well below the 30% observed before the crisis. Over the last quarter, the number of RJs (4.811) is still increasing rapidly, +59%.

41.085 judicial liquidations (LJ) were opened (+ 31,4%) in 2023 and 11.567 (+ 30%) during the fourth quarter.

The increase in defaults by large employers threatens more jobs: 243.000 jobs were threatened in 2023, almost 100.000 more over one year

The increase in failures is particularly strong among SMEs with more than 100 employees. 171 defaulted in 2023 compared to 95 in 2022, an increase of +80% over one year. This volume of defects has not been approached since 2014; year which then included 185 large SMEs.

SMEs with 50 to 99 employees show a much smaller change (+30%) but with 249 failures, we are also getting closer to the 2014 benchmark (266).

But it is for the smallest SMEs, with fewer than 50 employees, that the loss experience is the heaviest. 4.319 companies with 10 to 49 employees failed in 2023 (+43%), a number which is close to the 4.400 in 2009.

With more than 52.000 open procedures, VSEs concentrate the majority (92%) of the judgments but the acceleration of the difficulties of SMEs excessively penalizes the number of jobs likely to be impacted. 243.000 direct jobs are or were threatened in 2023.

Business failures are accelerating in construction

Construction

The construction sector accounts for 24% of bankruptcies and now has more than 14.000 defects, including nearly 11.000 in construction activities alone. 14.112 entrepreneurs obtained the opening of a procedure, this is 40,7% more over one year. 10.990 were located in structural work (4.140; + 44,1%) and finishing work (6.850; + 38,9%). General masonry (+2.779; +50,5%) and electrical installation work (1.161; +48,3%) are the most impacted.

Public works overall showed a slightly smaller increase (720; +31,1%) but routine earthworks slipped by 41,2% (391 defects).

Real estate agencies recorded the worst trend (910; 116,7%).

Trade

The trade exceeds 12.400 defaults (12.408) but contains the increase (31,76%) below the general average (+35,8%).

The trends are more severe in the clothing retail trade (1.130; 51,3%). DIY & household equipment seems to hold up better (928; +39,8%) despite the tensions noted in furniture (278, +59,8%).

Wholesale trade held up a little better (2.404; +28,4%) except in textiles and clothing where the number of defects (188) exploded by more than 74%.

Services

In business services (7.561), the increase (+36,1%) is in line with the general trend. If building cleaning (765; +52%) remains poorly oriented, communication and management consulting activities show equally severe developments (1; +1.269%), particularly in public relations (44,2; +213). .57,8%). Advertising agencies are not better off (311 defects; +58,7%).

Manufacturing

The industry just below 4.000 defects seems to be holding up a little better (+29,2%), driven by manufacturing activities (2.187; +23,6%) more than by the agri-food industry (1.795; +36,6%). ). The manufacturing industry is, however, weakened in textile – clothing activities (225; +41,5%). The agri-food sector is driven by bakery which alone has 1.099 defects but an increase limited to + 25,7%. On the other hand, the processing and preservation of butcher's meat goes wrong very quickly. The activity recorded 81 failures, the highest number in at least ten years, an increase of 125%.

Transport

More than 2.300 carriers failed in 2023, an increase of 30,7%, lower than the general average. The trend is, however, less favorable for road freight transport, which has more than 1.500 failures (+39,7%). The situation deteriorated significantly at the end of the year with an increase of 63% driven by intercity (+71%) more than by local freight (+59%).

After a generally homogeneous year, greater regional disparities appear during the last quarter

One in three failures is concentrated in Auvergne-Rhône-Alpes and Ile-de-France. In these two regions, the increase in procedures is close to 38%.

In Ile-de-France, 12.653 procedures were opened in 2023, thus accounting for 22% of business failures in the country. The region is now approaching its 2015 level of insolvencies. The last quarter was more complicated, up 44%.

Home to many head offices of large employers, Ile de France (and in particular Hauts de Seine) is strongly impacted. The number of suspensions of payments from companies with more than 50 employees (115) is the highest in ten years.

Auvergne-Rhône-Alpes has 6.834 defects, an increase of 38%, a number comparable to that of 2016. The end of the year was barely less tense with a deterioration reduced to 36%.

Among the other regions, Hauts de France, which had a difficult year in 2022 (+77%), is first in the class in 2023 with an increase reduced to 26% (4.542). However, the last quarter returned to the severe red at +43%.

In contrast, Overseas communities bring up the rear with an increase in defaults of 43,8% in 2023, rising to +66% at the end of the year.

Provence-Alpes-Côte-d'Azur, Occitanie and Nouvelle-Aquitaine will have between 5.000 and 6.000 defaults in 2023. At the top of these: PACA (5.947) where the increase in the number of defaults accelerates over the last quarter (+40 %) against +32% over the year. New Aquitaine (5.139) is going the opposite way (+38% in 2023 and +31% in Q4). Occitanie (5.329) fails to find a better pace at the end of the year: +38% over the last three months, compared to +40% over the year.

In the East, if the Grand-Est (4.125) manages to raise the bar at the end of the year (+ 26% in Q4 against + 34% over the year), this is not the case for its neighbor Burgundy -Franche-Comté (2.059) where defaults exploded by +46% while the region was in line with the national average (+36%) over the full year.

The regions of the North-West quarter are a little better oriented. If Normandy (2.176 defaults) stabilizes the trend around +32%, Brittany (2.165) reduces the increase from 34% over the year to 27% in T4 while Centre-Val-de-Loire (2.067) offers the best end-of-year performance (+19%) compared to +34% for the full year.

2024 starts without momentum…

For Thierry Millon: “At the start of 2024, uncertainty is gaining ground. In a context of sluggish growth, financial leverage is a driver that many companies may still lack to enable them to respond to the challenges of ecological transition, Human Resources and of course business. Despite the successive crises that have followed one another since the beginning of the decade, the real economy is holding up but corporate cash flow is being undermined. The last quarter was heavy on the insolvency front and takes us back to a period (2012 – 2013) when our economy had 63.000 business insolvencies. This therefore puts us on a delicate trajectory for 2024. Moreover, if the dynamic of creation of commercial companies is still strong (SARL and SAS) with more than 270.000 in 2022 and probably again in 2023, these structures also constitute the majority of failures (49.000 out of 57.000 in 2023). The wall of bankruptcies feared for three years is naturally less than ever envisaged, nevertheless, it is fundamental to protect itself from the risk of default of its customers as well as its strategic suppliers. 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. »

Complete study “Business failures and backups – Q4 and 2023 balance sheet download online here

Methodology: Altares business failure statistics include all legal entities with a SIREN number (individual businesses, liberal professions, companies, associations) and having been the subject of a judgment to initiate proceedings. by a Commercial or Judicial Court (ex TGI - TI)

Glossary: ​​Business failure corresponds to the opening of a safeguard procedure, receivership or direct liquidation before a Commercial or Judicial Court. This also concerns openings after resolution of the recovery plan. On the other hand, the default statistics do not consider either amicable procedures (adhoc mandate or conciliation) nor the consequences of opening (discontinuation of plan or conversion to liquidation).

Illustrative image of the article via Depositphotos.com.