Economic alarm: Business closures in Germany reach highest levels since 2011

Germany experienced a significant rise in business closures in 2024, with 196,100 companies shutting their doors, marking a 16 per cent increase compared to 2023.

This marks the highest number of closures since 2011, when the fallout from the global financial crisis severely impacted the German economy, Caliber.Az reports citing foreign media.

The report, released by the Creditreform agency in collaboration with the Leibniz Center for European Economic Research (ZEW), highlighted troubling trends across various sectors. "The closure figures are alarming across all sectors," said Patrik-Ludwig Hantzsch, an economic researcher at Creditreform. "Industrial companies, in particular, are struggling with high energy costs in production, while competitive pressure from foreign suppliers continues to rise."

Energy-intensive industries, including sectors like pharmaceuticals, chemicals, and healthcare, saw significant losses. Specifically, 1,050 business closures were recorded in these sectors, representing a 26 per cent increase from the previous year. These industries are grappling with rising energy costs that have strained their financial stability, alongside increasing global competition.

While small, owner-managed businesses have traditionally accounted for a large portion of closures, larger and economically active companies are now also increasingly impacted. In 2024, more than 4,050 such companies deregistered, nearly double the usual annual number. This marks the third consecutive year of sharp increases in company closures in this category, signaling a broader trend of economic distress.

"This is a clear warning to policymakers," Hantzsch warned. "Many companies are relocating their production abroad, closing locations, or ceasing investment in Germany altogether." He emphasized the long-term consequences, noting that the closures could lead to a gradual erosion of Germany's industrial base and expertise, which has traditionally been a cornerstone of its economic strength.

As these closures continue to disrupt the economy, Hantzsch and other experts are urging government intervention to address the rising pressures on businesses, particularly in energy-intensive sectors, and to create a more conducive environment for companies to thrive in Germany.

By Vafa Guliyeva