Strong price competition drives companies out of business

In January, 61 companies were declared bankrupt, one firm less than in January 2014, insurance firm Euler Hermes said in a report. The total revenue of the companies that went bust in January stood at PLN 310 million and they employed 1,500 workers. The highest number of firms that were declared bankrupt last month were from the construction sector, mainly specializing in infrastructural projects. Their number grew despite an increasing value of public investments, mainly due to the very low profitability of the contracts, resulting from strong price competition between contractors – price is still the deciding criterion in public tenders, Michał Modrzejewski, head of Industry Analysis at Euler Hermes, explained. However, the biggest firms that went bankrupt in January were from the food industry. The largest company was a grain distributor. Also, several bakeries were shut down last month. “The consumption of bread is declining. The market is also consolidating rapidly and bakeries are faced with increasing competition from retail chains and discount stores which bake their own breads,” the report said. The second largest company to go bust last month was from the meat industry. The meat market has seen strong price pressure since the closure of some exports markets last year.