Global business insolvencies set to rise for fifth consecutive year, warns new Allianz Trade report - Trade Treasury Payments

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Global business insolvencies set to rise for fifth consecutive year, warns new Allianz Trade report

Allianz Trade, a trade credit insurance provider, has released its latest Insolvency Report with updated forecasts for 2025 and 2026. With global business insolvencies increasing by 10% in 2024 and insolvency rates rising in four out of five countries globally, the report and revised forecasts are of particular interest.

These forecasts predict that global insolvencies will contine to increase in 2025 and 2026, though at the lower rates of 6% and 3% respectively. If these predictions hold true, that will mark 5 consecutive years (2022-2026) of rising insolvencies.

Global trends and regional highlights

North America experienced the largest increase in its insolvency rate in 2024, experiencing a 22% rise, largelgy prevalent in the USA. This figure is expected to remain high in 2025, at an 11% increase, which is equates to 25,580 additional companies in the region going out of business. 

The Eurozone was also impacted by a steep rise in insolvencies, experiencing 19% more in 2024 than the year prior. Particularly affected were Italy (with a 45% increase), Germany (23%) and France (17%). These three nations are also expected to continue to experience rising insolvencies in 2025, with the Allianz Trade forecasts predicting 17%, 10%, and 2% increases respectively.

The UK was an outlier in the data as its insolvencies declined by 5% in 2024, with another slight decrease of 3% expected for 2025.

In Asia, the largest insolvency rate increases for 2024 occurred in Singapore (46%), Australia (41%), and New Zealand (40%). China is expected to experience a 7% increase in 2025 followed by a 10% increase for 2026.

Drivers behind rising insolvencies

As with any significant macroeconomic trends, it can be difficult to say for certain which external factors contributed to the shifts, but there are some that have certainly had an impact. 

Persistently high interest rates and restrictive credit conditions have made it difficult for many businesses, particularly small and medium sized enterprises (SMEs) and those with a high degree of leverage, to continue to operate. 

Geopolitical tensions haven’t helped. 

The Russia-Ukraine conflict, instability in the Middle East, and trade war risks between major economies, notably the US and China, have created more risks and uncertainties for nearly all firms, given the interconnectedness of today’s business environment. 

The risks of trade wars can have a particularly outsized impact. Allianz Trade estimates that a full-fledged trade war could increase global insolvencies by an additional 7.8% in 2025 and 8.3% in 2026, which would mean 6 800 more firms would go out of business in the US and 9100 in Western Europe.

Sector impacts and job risks

According to the Allianz report, some sectors, notably the construction, retail, and services sectors, have been more vulnerable to insolvencies than others.

The vulnerabilities within these sectors also have direct implications for employment, putting around 2.3 million jobs globally directly at risk due to insolvencies in 2025, an increase in 120 000 from 2024.

Western Europe faces the highest job risks (1.1 million jobs at risk), notably in France (270 000), Germany (210 000), and the UK (152 000), but the impact in North America will also also be significant, with approximately 450 000 jobs at stake, marking a decade-high for the region. 

While relatively less impacted than their western neighbours, Central and Eastern Europe will see around 370 000 jobs at risk and Asia around 320 000, particularly in Russia, Japan, and China.

Changing European regulations

The EU’s proposal to implement a new “28th legal regime”, a set of optional rules that companies the bloc’s 27 member states could choose to follow instead of national laws, could have an impact on insolvency rates on the continent. 

This is because a side effect of making it easier to do business across Europe will be tougher competition, especially for smaller or weaker companies, which could lead more of them to run into financial trouble.

The bloc is also debating a cap on payment terms of 30 days across Europe. Again, while shorter payment times could help some businesses by getting them paid faster, it could also hurt businesses that depend on having longer payment periods to manage their cash flow.  

Regardless of whether these proposed changes come into force, it will be important for firms in Europe, and around the world to stay abreast of the changing economic conditions both at home and abroad.

Those looking to explore the insights from the Allianz Trade Insolvency report in more detail, are encouraged to read the full report on the Allianz Trade website.