Over 55,000 companies shut down in France as country’s economy implodes

01/09/2024 / By Richard Brown

France witnessed a record-breaking year for business closures in 2023, with over 55,000 companies shutting down, according to data compiled by the Bank of France as of December. The statistics, released by the regulator on Saturday, reveal that an average of 55,492 companies faced bankruptcy or liquidation over the past 12 months.

While the surge in closures is significant, the Bank of France emphasized that the level remains below the average annual bankruptcy filings recorded between 2010 and 2019, which stood at 59,342. The pandemic years saw a considerably lower number of business closures, almost half of the figures reported in 2023.

The report highlighted that the majority of closures in 2023 affected small and medium-sized enterprises. Businesses with less than 250 employees accounted for the vast majority, totaling 55,435 closures. Additionally, medium and large firms with over 250 employees experienced an increase in closures, with their numbers doubling from 2022 to reach 57.

The negative trend was particularly prominent in the restaurant and hotel industry, where closures surged by 44.6 percent year-on-year. The information and communication technologies sector also saw a significant increase of 44.4 percent. In contrast, the country’s agricultural sector recorded a 1.3 percent drop in the number of bankruptcy filings.

A global perspective reported by the Financial Times in December indicated that corporate bankruptcies worldwide surpassed levels seen during the 2008 global financial crisis. Analysts attribute this surge to higher key interest rates and the self-liquidation of so-called “zombie firms,” which survived the Wuhan coronavirus (COVID-19) era primarily due to government support.

French economic activity for 2023 very disappointing

The Bank of France recently also reported that French economic activity in 2023 was disappointing. In its latest report published in late December, the French central bank lowered its growth forecast for the country’s economy to just 0.8 percent for 2023. (Related: Desperate French government trying to convince tourists that it is safe to visit the country despite ongoing rioting.)

The central bank also reports that France’s gross domestic product for the fourth quarter of 2023 only grew by a measly 0.1 percent, very narrowly avoiding a recession and reversing the 0.1 percent contraction in GDP in the previous quarter.

“[Economic] activity is resisting in the fourth quarter thanks to services,” noted Bank of France Chief Economist Olivier Garnier. “The normalization trend in terms of price-setting behavior by companies is being confirmed month after month.”

Following the report on bankruptcies, recruitment remains a problem, with 45 percent of companies having problems filling vacancies.

Despite the dismal economic reports coming out of France, the country’s central bank believes the economy will gradually recover in 2024, as it predicts inflation to drop from the annual average of 5.7 percent in 2023 to just 2.5 percent in 2024. Inflation will then continue to fall and by 2025 France is expected to drop to 1.8 percent, slightly below the European Central Bank’s inflation target of two percent annually.

The easing of price increases is expected to be combined with a rise in real wages, which the bank claims will provide French households with some breathing space as their purchasing power for 2024 increases by a projected 1.5 percent compared to last year’s 0.7 percent increase.

This could then fuel even more growth from 2025 onwards, which is when the negative effects of high interest rates are expected to fade and allow investment into France to pick up again after an expected 0.4 percent decrease in 2024.

“In 2026, these trends should strengthen to generate a dynamic recovery,” noted Garnier.

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