Insolvencies up by 13% in April – Euler Hermes. Tough times for builders and SMEs

As many as 76 companies became insolvent in April, which is a 13 percent y/y increase, Euler Hermes said. Since the beginning of the year, 336 firms became insolvent, which is 15 percent more than in the corresponding period of last year. The largest number of companies filed for insolvency was once again seen in the construction sector, 18 companies from that industry did so, which is twice more than last year. According to Euler Hermes, in construction, there is a shortage of everything: not only employees or materials but also time for contracts and sufficient margins from their implementation. So there are already the first cases of companies leaving investments, for which payment of a penalty for failure to perform a contract is associated with smaller losses than continuing their implementation. “Many companies - not only smaller subcontractors, but also companies servicing the investment process, trade or finally production will experience the effects of low or even negative profitability of the construction sector,” Tomasz Starus from Euler Hermes said. The other sector that is having difficult times are the SMEs. Due to growing consumption and exports. “Those who sell the most, are the ones that can cut the prices to a level unattainable for them and who can credit sales for a period and on a scale that the Polish SME sector cannot afford. However, the turnover of currently insolvent companies is getting higher, the average turnover of companies from this group is reaching dozens of PLN millions. What's more, in April the highest increase in the number of insolvencies concerned joint-stock companies,” the report said. Insolvency includes the inability to pay liabilities to suppliers, resulting in bankruptcy or any form of restructuring proceedings.