Rabobank predicts a wave of bankruptcy, ‘but that’s not bad’

This article was last updated on August 30, 2024

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Rabobank predicts a wave of bankruptcy, ‘but that’s not bad’

Over the next four years, a wave of bankruptcies will hit companies in the Netherlands. Economists from Rabobank predict this in a new study. The peak of companies collapsing is expected to ultimately be comparable to the credit crisis in 2008, but according to Rabobank this does not necessarily have to be bad news for the economy.

In fact, it will actually work out well if a large group of companies that have been struggling for a long time are cleared out, as Rabo economist Hugo Erken summarizes. “A wave of bankruptcy does not have to go hand in hand with rising unemployment,” he emphasizes. “There really needs to be a significant shock in the number of bankruptcies if you want that to be reflected in unemployment.”

It is of course a disaster for the entrepreneurs themselves, financially and psychologically,” Erken also says. “But they do retain financing and especially staff for growing companies. There is a major staff shortage. That labor productivity last year has fallen is a sign on the wall. That is worrying.”

Several hundred

Rabobank economists created a new calculation model to predict how many companies could close their doors in the coming years. The number of bankruptcies has been increasing for six quarters in a row, but is still historically low at around 1,100 per quarter.

After the Internet bubble burst around the turn of the millennium, more than 2,000 companies went bankrupt every quarter. During the credit crisis in 2008, there were 2,700 to even 3,400. Due to massive government support after the outbreak of the coronavirus in 2020, the number of bankruptcies fell to only a few hundred per quarter.

The corona support allowed many companies that were already struggling before the crisis to postpone bankruptcy for a long time. But these so-called zombie companies actually get in the way of healthy companies, says Erken.

Now that corona support is being phased out and the tax authorities want to see deferred taxes paid, the number of bankruptcies is slowly increasing. According to the calculations of the Rabo economists, this will continue to rise until 2027. In that year they expect a peak of 1700 to 1900 companies per quarter to collapse. That is an increase of 35 percent compared to last year.

From 2029, the Rabo economists expect the number of bankruptcies to decrease again. Erken believes that it is wise to let the market dynamics with companies do their work. “The government must above all exercise restraint. Various industry organizations will certainly sound the alarm if more companies in their sector collapse. But you should not start with that. The labor market is already tight. There really needs to be normalization. You can see that there are Many companies suffer from structural problems, such as debts and an outdated business model. It is better if they make way for new companies.”