Executive Summary
After surging by +10% in 2024, our Global Insolvency index is set to rise by +6% in 2025 and +3% in 2026 as the delayed easing of interest rates and increased uncertainties keep companies under pressure. The number of business insolvencies rebounded in four out of five countries in 2024. The US stood out with a major rise (+22%) and the Eurozone also posted a noticeable acceleration (+19%), particularly in France (+17%), Germany (+23%) and Italy (+45%). The UK saw a reduced number of cases (-5%) and China recorded an upside trend reversal of +3%. In Western Europe, nearly half of sectors have surpassed their pre-pandemic levels of business insolvencies, with the biggest increases in 2024 seen in transportation, construction and B2B services. Looking ahead, the delayed easing of interest rates and increased uncertainty will leave companies in wait-and-see mode, reducing activity and threatening already fragile firms. North America and Asia are expected to drive the rise in business insolvencies (US: +11% to 25,580 cases in 2025). Western Europe will also face another rise in 2025 (+3%) for the fourth consecutive year, before seeing a modest improvement in 2026 (-3%), a trend mirrored by Central and Eastern Europe. In Germany and Italy, business insolvencies would continue to increase in 2025 (+10% and 17% respectively, to 24,300 and 14,000 cases) and 2026 (+2% and +2%), but the fiscal stimulus announced in Germany could limit this outlook. In France, insolvencies would reach a new historical high in 2025 with 67,500 cases (+2%), before falling by -4% in 2026. In the UK, where insolvencies reached a 10-year high in 2023, the number of insolvencies will decrease moderately again in 2025 (-3%), before a larger improvement in 2026 (-7%).
Rising insolvencies will put 2.3mn jobs directly at risk globally in 2025 (+120k compared to 2024), followed by a marginal rise in 2026 (+20k). We calculate this based on the average number of employees per firm, the share of companies that go into a liquidation phase immediately (72% on average) and the share of people laid off in a restructuring phase (32% on average). Western Europe (1.1mn) would lead this global count, ahead of North America (~450k), with both regions recording a 10-year high, and followed by Central and Eastern Europe (~370k) and Asia (~320k), which have both been recording a moderately increasing annual number since 2022. Globally, the main sectors at risk are construction, retail and services.
If interest rates remain high for longer, the lower availability of credit could lead to even more insolvencies. Access to credit allows firms to refinance liabilities, bridge revenue shortfalls and avoid bankruptcies, particularly during economic downturns. Although we expect interest rates to decline both in Europe and the US, inflationary risks, especially in the US, could slow down the pace of rate cuts. If borrowing costs rise and make credit less accessible, this could lead to a slowdown in credit growth, tightening financial conditions and increasing default risks for highly leveraged firms. Our estimates suggest that a 1% decrease in credit increases insolvencies by about +3% in the US, +0.4% in Germany, +1% in the UK and 2% in France in the next three months.
A full-fledged trade war could also push global insolvencies up by about +8% in 2025 and 2026. Our insolvency outlook could deteriorate should the European economy perform weaker than expected, with a stronger lack of momentum, or if there is weaker resilience in APAC and larger headwinds from China, as well as if the outlook for the US deteriorates further. Geopolitics could also be a major factor of turbulence, with the ongoing conflicts in Russia-Ukraine and the Middle East, tensions in the South-China-Sea and political uncertainties in Taiwan. Trade uncertainty and potential tariffs have already contributed to increase our global forecasts by +1.4pp for both 2025 and 2026. Yet, a full-fledged trade war would lead to an additional +2.1pp and +4.8pps increase to +7.8% and +8.3% globally in 2025 and 2026. For 2025-2026, this would mean +6,800 additional cases in the US and +9,100 in Western Europe.
Europe could benefit from increasing defense spending, though the positive impact could be limited to a small number of sectors. The surge in European defense spending presents both an opportunity and a challenge. If funds are directed toward domestic production, technological development and supply-chain expansion, the economic benefits could be substantial. However, capacity constraints in European defense industries mean that a significant portion of spending is currently flowing to foreign suppliers, limiting to some extent the immediate fiscal multiplier effect. Historically, sustained defense investment has driven industrial growth, as seen in France and Germany during the Cold War. Today, increased domestic procurement could revitalize aerospace, heavy machinery, metals and electronics. The metals and chemicals sectors will also see higher demand for steel, aluminum and composites, while advanced technology firms in avionics, semiconductors and cybersecurity could also gain from defense-related tech and R&D spending. Construction would benefit from infrastructure projects such as base expansions, airfield upgrades and naval port modernizations, while transport and logistics services may see moderate gains due to increased military mobility and deployment activities. In contrast, consumer-driven sectors will experience minimal direct impact, while healthcare could face budgetary trade-offs if defense spending leads to fiscal reallocation. Overall, the positive boost for demand in the sectors mentioned above and its spillovers could reduce insolvencies by -0.4pp and -1.0pp in Europe, sparing around 3,700 firms provided that domestic demand for other sectors holds up and governments adopt good payment discipline.
Meanwhile, regulatory changes could also shape long-term insolvency trends in Europe. In an unusually bold move, the European Commission announced a new 28th legal regime, which would exist alongside the national legal systems of the 27 EU member states. The idea behind this concept is to create an optional legal framework that businesses and individuals across the EU could choose to operate under, simplifying cross-border transactions and reducing legal fragmentation. The proposal is likely to focus on putting forward a unique digital identity recognized across all EU member states, and a harmonized legal framework for corporate law, insolvency, labor laws, and possibly taxation. While this will not have a strong impact on insolvencies in the short term, a 28th regime should intensify competition within the internal market in the longer term and structurally increase insolvencies in less competitive regions. Additionally, far reaching changes in the regulatory framework on insolvencies should be announced in the Commission’s upcoming communication on completing the “Saving and Investment Union” and could lead to higher insolvencies in less stringent jurisdictions, who will be pressured to comply with the new EU rules. Meanwhile, limiting payment terms to 30 days remains under discussion in Brussels. Movement on this front could accentuate insolvencies in an already fragile region through an increase in the liquidity gap. sustainability.