More companies need to fail to get the economy back to health. That’s what economists at Rabo Research say in response to a warning from credit insurer Allianz Trade that the Netherlands could face a wave of bankruptcy.
According to Allianz, 50% more companies will fail this year than last year. According to economist Nic Vrieselaar of Rabo Research, it could be an extra ounce if the economy returns to normal. ‘Because then people, space and capital will become available that healthy businesses can benefit from, no matter how sad for the entrepreneur who falls. Failure is obviously terrible for an entrepreneur and for the people involved, but often not so for the economy as a whole.’
“The number of bankruptcies has been absurdly low”
Vrieselaar explains that a healthy economy thrives on movement, dynamism and innovation and that unfortunately companies that can’t make it are also part of it. However, if a business fails, the capital, space and people become available. And the latter is badly needed given the shortage of screaming staff.
Insufficient dynamics
In recent years, that dynamic has been insufficient, argues Vrieselaar. With the main culprit being corona support which has 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.”
The situation is slowly changing, although Vrieselaar believes that the number of bankruptcies could increase. “You see 150 to 200 bankruptcies a month for the last few months, there’s been an average of 500 a month for the last 40 years.” According to the economist, not only is that number to be expected to rise, but he also expects it in the light of personnel shortages, rising wage costs and high interest rates (so companies can no longer live on credit, ed). .
BMKB scheme
The government recently decided to extend the BMKB scheme by four years, giving SMEs easier access to finance. To what extent will the economy benefit from the new support measures? Vrieselaar calls this a difficult point. He points out that fundamentally sound companies benefit from this, particularly from a sustainability perspective, but that there is once again the danger that the weak brothers will be kept afloat. Ergo: aid is at odds with the self-cleaning capacity of the economy.
‘In recent months, 150 to 200 companies have gone bankrupt every month, in the last 40 years there have been an average of about 500 per month’
Vrieselaar acknowledges that it is difficult to assess whether an individual company is profitable, but stresses that this is the job of the banks.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
