Bankruptcies among Polish businesses on the rise

Close to 700 Polish businesses went bankrupt in 2009, shows a report called “Bankruptcy processes in Poland” published by the Conference of Financial Companies. It is nearly 65% more than in the previous year but 3 times less than in 2002 which is regarded as the worst year for the Polish economy in recent history. There is however nothing to be happy about. We have just started to emerge from the crisis and the number of bankruptcies in 2010 can be expected to exceed that of 2009.

“An analysis of bankruptcy filing trends in Poland is important for the evaluation of future situation on the consumer market. The situation in the business sector is an indicator of future financial position of households and of consumption growth rate in Poland,” Andrzej Roter, KPF General Director, explained the reasons behind starting the cyclical research project.

The author of the research is Paweł Antonowicz, Ph.D., senior lecturer at the Faculty of Business Economics, Department of Management of the University of Gdańsk. The report was initiated by the Conference of Financial Companies, KRUK SA and the ERIF Register of Debtors (one of three credit information bureaus operating in Poland).

Publications in the Court and Economic Gazette (Monitor Sądowy i Gospodarczy) were the source of information which has been subject to a detailed analysis. Additionally, the report used information gathered by the Main Statistical Office.

“People responsible for running a business must remember that in order to maintain financial liquidity they should protect themselves against unfavourable changes such as financial problems or dishonesty of customers or contracting parties.  It is then in their best interest to use all available methods of monitoring and verification of the reliability of buyers of their products or services. The above concerns both new and old business partners.  No one is able to guarantee that their financial standing will not suddenly deteriorate which would directly translate into losing financial liquidity and the need to file for bankruptcy,” said Urszula Okarma, President of the ERIF Register of Debtors Biuro Informacji Gspodarczej SA (credit information bureau).

When analysing bankruptcies in Poland it is important to note that the number of bankruptcies among companies is very small in comparison with the number of liquidation processes. In 2009, 693 bankruptcies were recorded, while in the same time 357,530 business entities were deregistered (removed) from the REGON database. The above means that for every 1,000 companies liquidated in that period there were only two bankrupt businesses.

Statistically, on average, there were 58 bankruptcies in each month of 2009. The biggest number of businesses were declared bankrupt in May (70), September (75) and December (77), while the least in January (31), February (51) and August (45).

Taking into account geographical distribution of bankruptcies, the largest number of entities went bankrupt  in the mazowieckie, śląskie and dolnośląskie provinces (respectively 17%, 15.4% and 12.4% of all bankruptcies declared in 2009). The smallest percentage of bankruptcies was recorded in the świętokrzyskie province (1.6% of all bankruptcies in 2009), podlaskie (1%) and opolskie province (0.4%).  In nearly all provinces an increase in the number of bankruptcies could be noted in 2008-2009. Only the opolskie province recorded a drop from 5 bankruptcy proceedings in 2008 to 3 bankruptcies recorded in 2009.

Interesting information can also be obtained from the analysis of the number of bankruptcies in individual sectors. It is also an indication of the condition of each sector of the Polish economy. In 2009, the biggest number of bankruptcies was recorded by companies from the construction sector (36% of all bankruptcies) and from the wholesale and retail sale sector (20%). Worth attention is also a relatively large percentage (5%) of transport companies which were declared bankrupt in 2009. The above means that 32 businesses went bankrupt. It can be guessed that their going out of business was largely connected with the situation in the building and trade sectors. As for the remaining 27 bankruptcies constituting 4% of all bankruptcies of 2009, they concerned companies from the financial intermediation sector, real estate rental and management and real estate sale and purchasing sector. The other businesses which went bankrupt were from very diversified economy sectors.

The largest percentage of bankrupt entities (64.21%) were limited liability companies. In total, 445 of such companies were declared bankrupt in 2009. As for sole proprietorships, 19.05% of them declared bankruptcy.

Data from the beginning of this year show that a further growth in the number of bankruptcies can be expected. In January 2010, 51 businesses declared bankruptcy. The above means an increase in comparison with a corresponding period of the previous year by close to 65% (31 bankruptcies in January 2009). Obviously, the distribution of bankruptcies over months is not proportional and therefore it cannot be expected that the total number of companies which will be declared bankrupt in the entire 2010 will increase proportionately. It can be assumed however that the number of bankruptcies in 2010 will be higher than in 2009. One of the reasons is that the effects of the crisis (which we are currently emerging from) are always visible after a certain delay. It seems that the results of the report on Polish business bankruptcies in 2009 confirm that the Polish economy is recovering from the period of economic slowdown and the increase in the number of bankruptcies in January 2010 and the possible increase in the number of bankruptcies in the entire 2010 as against the previous year is only caused by the shift in time of the negative effects of the above slowdown. The higher number of bankruptcies will probably not have a significant impact on the economic situation in the current year.

It is no wonder then that now both debt collection companies and credit information bureaus have been recording a significant increase in the number of accounts accepted. The above is especially visible in credit information bureaus. For example, the ERIF Register of Debtors has recorded a nearly two-fold increase in the number of businesses reported as debtors.