Economy: Business Bankruptcies are Skyrocketing in France

Once supported by a range of government measures, French businesses today face an unrelenting economic reality. The end of public aid reveals the depth of difficulties striking many sectors and leads to a dramatic rise in business failures and liquidations. In this article, we will dissect the most recent data to understand the extent of this wave of failures, analyze the underlying causes, and explore the paradoxes of this troubled period, where the will to undertake persists despite the obstacles. For although the shadow of crisis looms, it has not yet stifled the entrepreneurial spirit, which, against all odds, is manifesting vigorously in certain regions of the country.

An economy in crisis

The first half of 2024 marked a worrying turn for the French economy, in great difficulty, with an unprecedented escalation in business failures. According to the National Business Barometer, insolvency proceedings have jumped by 20.5%, reaching a total of 30,406 companies in difficulty. This dramatic increase reflects a deep malaise, fueled by a degraded economic context. The real estate, construction, and transport sectors, particularly exposed to inflationary shocks and the energy crisis, are among the hardest hit. Judicial liquidations, in particular, have skyrocketed with a staggering increase of 66.1%, highlighting the severity of the situation. The domino effect caused by rising raw material costs and falling demand has created a fertile ground for these serial bankruptcies, affecting both large and small businesses alike.

Behind these figures lies the brutal reality of an entrepreneurial fabric in distress, orphaned by the aid that had helped through the health crisis. The gradual withdrawal of the “whatever it takes” approach has left businesses facing unprecedented economic adversity, where resilience alone is no longer enough. The lack of liquidity, coupled with increasingly restricted access to credit, has led many businesses to bankruptcy, with no possibility of recovery. This wave of failures testifies to a structural vulnerability that the support measures had temporarily masked. Now, this vulnerability is coming to light and threatens to turn the cyclical crisis into a true systemic collapse.

The other side of the coin: A will to undertake despite everything

Paradoxically, while the French economy totters under the weight of bankruptcies, an unexpected dynamic is emerging on the business creation front. The first half of 2024 saw a 9% rebound in new registrations, a sign that the entrepreneurial spirit persists despite a largely unfavorable environment. This resurgence of initiative is partly rooted in the resolution of technical malfunctions of the new registration platform, which had stifled the ambitions of many entrepreneurs in 2023.

However, this phenomenon should not mask the deep disparities that persist. While some regions like Île-de-France, boosted by the Olympic Games effect, record strong growth, others, notably the overseas departments, continue to sink, undermined by structural economic difficulties and a cruel lack of support.

Similarly, this will to create contrasts sharply with the reality of some sectors struggling to recover from the crisis. Accommodation, catering, and construction sectors continue to suffer from a labor shortage and a drop in demand, thus hindering any sustainable recovery.

This dichotomy between the creation and disappearance of businesses highlights a two-speed economy. The French economy is at a decisive crossroads, where the surge in bankruptcies and entrepreneurial momentum coexist in palpable tension. While some statistics and the resilience of some economic actors inspire some optimism, they cannot compensate for the severity of the crisis affecting a large part of the economic fabric.