More companies need to go bankrupt to get the economy healthy again. This is what economists at Rabo Research say in response to the warning from credit insurer Allianz Trade that the Netherlands could face a wave of bankruptcy.
According to Allianz, 50 percent more companies will go bankrupt this year than last year. According to economist Nic Vrieselaar of Rabo Research, it may be an ounce more if the economy is to return to normal. ‘Because then people, space and capital will become available that healthy companies can benefit from, no matter how sad it is for the entrepreneur who falls over. Bankruptcy is of course terrible for an entrepreneur and the people involved, but this is often not the case for the economy as a whole.’
Vrieselaar explains that a healthy economy thrives on movement, dynamism and innovation and that companies that do not make it are unfortunately also part of that. However, if a company goes bankrupt, capital, space and people become available. And the latter is badly needed given the screaming staff shortages.
In recent years, that dynamic has been insufficient, argues Vrieselaar. With the main culprit being the corona support that not only kept healthy companies afloat, but also countless so-called ‘zombie companies’, companies that actually have no right to exist. “The number of bankruptcies was absurdly low.”
That is now slowly changing, although Vrieselaar believes that the number of bankruptcies can increase. ‘You see 150 to 200 bankruptcies per month in recent months, there have been an average of 500 per month over the past 40 years.’ According to the economist, it is not only desirable for that number to increase, he also expects it in view of staff shortages, rising wage costs and high interest rates (as a result of which companies can no longer live on credit, ed.).
The government recently decided to extend the BMKB scheme by four years, giving SMEs easier access to financing. To what extent will the economy benefit from new support measures? Vrieselaar calls this a difficult point. He points out that companies that are fundamentally healthy benefit from this, particularly with a view to sustainability, but that there is once again the danger that weak brothers will be kept afloat. Ergo: aid is at odds with the economy’s self-cleansing capacity.
Vrieselaar acknowledges that it is difficult to assess whether an individual company is viable, but points out that this is a task for the banks.