Creditreform warns

Austria is only at the beginning when it comes to insolvencies

In Upper Austria in particular, more companies are likely to be affected in the wake of the KTM problems.

(Bild: DOC RABE Media - stock.adobe.com)

Austria still has to prepare itself for a number of insolvencies, including major ones. This not only affects the economy in the Alpine republic, but a fundamental transformation is now taking place throughout Europe.

"We are only at the beginning of this development," says Gerhard Weinhofer, head of the Creditreform creditor protection association, regarding the KTM bankruptcy, which is expected to be filed on Friday. In terms of insolvencies, the Signa bankruptcy has "covered up a lot", i.e. obscured the view of the many medium-sized bankruptcies. There have already been around 5,000 corporate insolvencies, almost a quarter more than in 2023.

"Austria is heading for a new record year of corporate insolvencies. The reason is a toxic mix of declining exports, collapsing domestic consumption and high costs. High unit labor costs, high material and energy costs together with excessive regulation are making it difficult for more and more companies to be successful in Austria," Weinhofer expresses his concern.

Austria is heading for a new record year of company insolvencies. The reason for this is a toxic mix of declining exports, collapsing domestic consumption and high costs.

Gerhard Weinhofer

Economy is "always also psychology"
In Upper Austria in particular, other companies are likely to be affected by the KTM problems, said Weinhofer in an interview with the APA. "I believe that KTM will drag one or two suppliers with it". Because even if this insolvency is resolved quickly, by the beginning of 2025, the company will still have two years to pay. Suppliers will have to be patient until they get their money. In addition, "economics is always also psychology" - so if a leading company like KTM in the Innviertel region becomes insolvent, this could have a massive impact.

Austria has "shot itself in the foot"
 In the statistics, Upper Austria is still in a relatively good position after nine months, said Weinhofer, referring to the final figures for the period. But Austria had "unfortunately shot itself in the foot with its energy and wage policy", the insolvency expert said, referring to the relatively high collective wage agreements. "I believe that with KTM at the latest, Austrians need to wake up - we are no longer on the island of the blessed, where the state can fix everything". An active location policy is now required, which is also a task for the coalition negotiators. Austria is losing a lot of time due to the protracted coalition negotiations.

Austria is sailing along with the German economy - for better or for worse.

Gerhard Weinhofer

The previous locational advantage with good skilled workers is disappearing more and more. "Digitalization now also makes it possible to produce decent quality at lower costs in India or China". In Austria, this is aggravated by the fact that unit labor costs have recently risen far above average. The industry is heavily dependent on the German automotive industry, which is in a "veritable crisis". "Austria is sailing along with the German economy - for better or for worse," says Weinhofer.

With 9.5 insolvencies per 1,000 companies, Upper Austria is still in a relatively good position compared to the rest of Austria after the first nine months of the year, and the year-on-year increase of 26.8 percent was only just above the Austrian average. The highest number of insolvencies, at 22 per 1,000 companies, was recorded in Vienna, while the sharpest increase, at 60 percent, was in Burgenland, according to Creditreform figures.