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Businesses are finding it increasingly difficult to stay afloat amid the lingering effects of the pandemic and new economic challenges, according to the latest insolvency forecast report from Atradius.

The trade credit insurer expects a sharp increase in global insolvencies for 2023, as the continued withdrawal of pandemic-related government support combined with high inflation and tighter financing conditions make survival yet more difficult for businesses around the world.

After two years of decline during the pandemic years, global business failures rose by 9% year-on-year in 2022 as countries halted Covid-19 fiscal support packages and lifted temporary changes to insolvency legislation. This year, as global monetary tightening and Russia’s invasion of Ukraine drag on the world economy, Atradius expects that figure to jump to 49%.

A closer look at the figures behind this global average reveals a mixed picture. Countries that had previously managed to keep insolvency levels low thanks to generous support measures during the pandemic are now undergoing an adjustment to normal. This, in combination with the bankruptcy of zombie firms, will drive what Atradius calls “shocking levels” of bankruptcies in some markets such as South Korea – which is expected to see a 154% year-on-year increase – Italy, Hong Kong, New Zealand, Netherlands and the US.

At the regional level, Atradius predicts a 71% increase of insolvencies in North America, mainly driven by the US. In the Asia Pacific, it forecasts an increase of 56%. Meanwhile, for Europe, it expects a relatively mild increase of 27%, as the process of normalisation there is already more advanced compared to other regions.

Only two countries – Spain and Switzerland – are expected to post a decline in business failures this year. Both saw an above-average increase in 2022, and therefore experienced their insolvency normalisation earlier than their peers.

While the UK also saw the rate of business failures return to pre-pandemic levels in 2022, the insurer calls out the country as a “worrisome” case for this year, predicting that the low growth environment and weak economic recovery since Brexit will continue to push insolvencies higher.

Looking ahead to 2024, Atradius predicts that the global insolvency landscape will be more mixed, with some countries witnessing a rise in insolvencies while others start seeing a decline or stabilisation, as firms that are not able to survive without support will have already gone bankrupt.

However, the overall picture remains a gloomy one, says Theo Smid, senior economist at Atradius.

“The coming years are likely to remain challenging for firms,” he says. “They have to survive in an environment without the same generous government support that was received during the pandemic. Moreover, they face an environment with significantly tighter financing conditions, which is likely to be a challenge for firms that have taken up a lot of debt during the pandemic.”