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Greater numbers of Swedish companies going bust

Companies in Sweden are going bankrupt at an ever faster pace, new statistics show.

Published: 5 December 2008 14:58 CET

During November, 38 percent more businesses went bust compared to the same month last year, according to the latest figures from credit information company UC.

In October, the increase was 19 percent, and so far in 2008, bankruptcies are up 10 percent compared to the same period last year.

Most affected are companies in the auto industry in Västra Götaland and Skåne counties.

In addition, nearly half of the companies which declared bankruptcy this year are less than four years old and had a turnover of less than 10 million kronor ($1.2 million).

All told, 641 companies went out of business in November this year, compared to 465 in November of last year.

So far this year, 4,935 companies in Sweden have declared bankruptcy, compared to 4,491 last year.

The transportation industry has been the hardest hit by bankruptcies in 2008, with filings up 50 percent for delivery, taxi, and other transport services.

“For the most part, bankruptcies have affected small companies so far, which means that the social and economic consequences are small. But if the economy continues to deteriorate, even more established and larger companies are going to be affected and a spiral of bankruptcies can occur. Then the effects will be substantially larger,” said UC’s Fredrik Polland in a statement.

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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