As the Covid-19 crisis pushes the global economy into its first recession since 2009, Coface has sounded the alarm on a worrying increase in business insolvencies.

In its latest quarterly update, the credit insurer predicts a 25% increase in companies going to the wall in 2020 – the largest uptick in 11 years – with few sectors spared from the pain.

The double whammy of confinement measures taken by governments in more than 40 countries and the cancellation or postponement of consumer purchasing and investment has resulted in a supply and demand shock unlike any observed during previous major crises, the report says.

“Tourism, hotels, restaurants, leisure, and transport are badly affected, as are almost all specialised distributions segments and most of the manufacturing sectors,” says Coface, adding that durable consumer goods such as vehicles as well as sectors such as textiles and electronics, will likely be among the most punished.

Many governments are taking steps to support businesses to remain intact throughout this unprecedented period of global disruption. France and Germany have announced temporary suspensions of insolvency proceedings, while speaking at the end of last month, Alok Sharma, the UK’s secretary of state for business, energy and industrial strategy, announced changes to insolvency laws to help companies that need to undergo a financial rescue or restructuring process to keep trading. However, these measures won’t be sufficient to stem the tide of bankruptcies, according to Coface data.

Not all countries will be affected equally: among developed economies, the US is set to see a 39% increase in insolvencies, while bankruptcies will rise by 33% in the UK, Hong Kong and the Netherlands. Even in Japan, where the number of corporate bankruptcies was on a declining trend for 10 years and despite an average growth rate close to zero, Coface now sees a double-digit growth rate, at 12%. Countries such as South Korea, Singapore and Germany, at 5%, 10% and 11% respectively, will fare slightly better, due in part to relatively smaller production losses in their main industrial sectors. In developing nations, the toll will likely be greater, the report says. “The shock could be even more violent in emerging economies: in addition to managing the pandemic, which will be more difficult for them, they are also facing the fall in oil prices, as well as capital outflows that have quadrupled compared to their 2008 level.”

This gloomy outlook is based upon Coface’s forecasts of a fall in global GDP of 1.3%, recessions in 68 countries, and a decrease of 4.3% in world trade. However, the insurer warns that further downside risks are apparent, as its model does not take into account issues such as the numerous recent border closure announcements which are stymying exports to numerous markets. “Companies’ credit risk will be very high even in a best-case scenario, where economic activity gradually restarts in the third quarter of the year, and there is no second wave of the coronavirus epidemic in the second half of 2020,” says Coface.