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More Swedish companies going bust

The number of Swedish bankruptcies continues to climb, up 19 percent in October compared to last year, with Stockholm-area businesses being especially hard hit.

Published: 6 November 2008 08:46 CET

In October, the number of companies in Stockholm County shot up 53 percent compared to the same month last year.

Overall, Sweden has seen a 7 percent increase in bankruptcies for the year thus far, according to the credit information company UC.

And the full force of the economic slowdown appears to have hit Stockholm County hard.

“October literally constituted a bankruptcy explosion in Stockholm County,” said Roland Sigbladh, UC’s head of marketing, in a statement.

Most bankruptcies occur among private service, construction, and retail companies, as well as within the hospitality industry.

“In Stockholm there it’s a lot of consulting companies, restaurants, and construction firms. And it’s primarily these three sectors which are increasing right now,” said Sigbladh.

UC estimates that bankruptcies will increase around 20 percent nationwide in November and December, which would constitute an annual increase of 10 percent compared with 2007.

And according to UC, there are few signs that 2009 will be any better. The companies that have already failed have had long-standing problems, according to Sigbladh, and the real effects of the financial crisis and the weak economy will only become apparent in the new year.

“During the spring of 2009 things will probably really explode. This is only the beginning,” he said.

Despite the rise, however, Sigbladh emphasized that the number of bankruptcies remains is nothing to be alarmed about when viewed in a historical perspective.

“We’ve had a pretty low number of bankruptcies in recent years,” he said.

Also worrying, however, is the increasing number of bankruptcies in Sweden’s important export markets as firms find it hard to finance their operations, resulting in liquidity shortages and payment problems, according to the credit insurance company Euler Hermes.

“The official statistics show a clear change in trends in Great Britain and Germany,” said Alexis Spanos, the head of Euler Hermes in Sweden, in a statement.

In France and Spain, the increase in bankruptcies has accelerated noticeably, especially in Spain.

In the United States, the numbers paint a similarly dismal picture with a sharp rise in the number of bankruptcies.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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