The number of insolvencies at the end of October stood at 63,002 companies, a figure down by -0.9% over the last 12 months. This is the lowest level recorded since August2013. However, the financial cost (total of trade payables over 12 month)

has increased slightly (+0.5%), due to the recent insolvencies of medium-sized By Coface Group Economists enterprises (MSE). Has a cycle of fewer business failures finally begun? Restructuring in certain sectors such as automotives and transport, and the (relative) resilience of French consumption supports that assumption. Nevertheless, insolvencies are likely to remain at a very high level, as the growth in the number of new businesses since mid-2013 could, conver-sely, maintain the number of business insolvencies. Indeed, the first years in the life of a business are associated with a high risk of default. Coface remains cautious, forecasting a decline in company insolvencies for the whole of 2014 of -1.2% to 62,800 and of -0.5% in 2015 to 62,500 business insolvencies. We should not forget that between 2007 and 2008 the average number of company failures amounted to 50,100.


First year an year decline in insolvencies for 22 months

In October, the number of insolvencies over one year fell by -0.9% to 63,002 (chart n° 2 page 3), a level not observed since August 2013. This was the "best" month of October since 2011 with 6,052 insolvencies (chart n°3 page 3). Furthermore, those business failures are affecting fewer employees. The average number of employees per failure now stands at 2.92, almost as low as in 2008 (2.90). 


The economic context is probably in favour of a decrease in insolvencies: slight acceleration in private consumption (+0.6% in Q3 year on year) and in credit to non-financial businesses (annual rate of +0.8% at end October), and stabilisation in the volume of  xports of goods and services (+2% in Q3 year on year). In other words, activity has not collapsed. The drop in the number of business start-ups until December 2012 to 242,497 (excluding “autoentrepreneur”) may also have played a role in bringing down the number of
insolvencies. A business' chance of survival is weakest after its first year of existence but then increases over time. In other words, a "peak" in business start-ups will trigger an increase in company failures with a time lag range between one and three years. Moreover, the financial crisis did not affect all activity sectors with the same vigour. Some sectors have carried restructuring plans and through mergers the number of weak companies has decreased. This is observed in the automotives sector, as in the automobile components sector whose turnover plummeted from ¤25 billion to ¤15 billion between 2007 and 2013 but which is finally expected to grow by 3 to 5% in France in 2014 (source: FIEV). But at the same time, the costs associated with insolvencies, i.e.total trade payables of the insolvent companies over 12 months, is up 0.5%.


New signs of weakness

While micro-enterprises represent the majority of business failures (92,4%), followed by VSEs (4%) and SSEs (2.5%), the failures among MSEs and large enterprises increased slightly at the end of October at an annual rate of 5.9% while for all other categories of business the number fell. Since September 2014, 28 failing MSEs and large enterprises were among the largest 100 insolvencies for 2014, compared with 12 recorded for 2013. We must recall that October is traditionally the "most catastrophic" month of the year (chart n°3  page 3). These "large" insolvencies include the legal insolvency of the Union des coopérateurs d'alsace(turnover of ¤493 million) and the Société d'exploitation RAPP (turnover of ¤362 million) which owns the Fly, Atlas and Crozatier brands. 


The financial crisis affects the newest businesses as well as the oldest, which are on average bigger. Indeed, a context of dynamic economic growth can motivate rent-seeking behaviour some companies which does not foster innovation, business expansion or even a reduction in the concentration of the client portfolio, making them more vulnerable when a crisis occurs. Accordingly, since early 2009 the average age of insolvent companies has risen to 8 years and 7 months in October 2014 compared with a lowest level of 7 years at the end of 2008. This phenomenon requires special vigilance, all the more so as all sectors all sectors are concerned, with, in particular, "big" insolvencies in the metals sector


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