Surprise rise in Swedish bankruptcies

Bankruptcies rose 15 percent in September, snapping the streak of declining bankruptcies observed so far this year.

Bankruptcies increased particularly in metropolitan counties, which earlier had been the driving force behind the decrease in bankruptcies, business and credit information agency UC reported on Wednesday. However, the number of bankruptcies in 2010 so far has declined by 12 percent overall.

The number of business failures rose to 487, an increase of 64 or 15 percent compared with same month in 2009.

“The number of bankruptcies in September breaking the trend and increasing instead is a fact, but it would be unfortunate to make too much of the figures for a single month. Since so many other economic indicators are pointing up, so it appears to be more of a temporary increase,” said Roland Sigbladh, market director at UC.

“Primarily, small companies with few employees and revenues of several million kronor have been hardest hit by the recession, with bankruptcies as a result. Many of them have fought their way through the crisis, but some of them have now reached a point where they can no longer run the company,” he added.

In the first three quarters of 2010, 4,547 businesses have gone bankrupt, compared with 5,146 in the first three quarters of 2009. In particular, Stockholm and Skåne counties experienced a sharp increase in corporate bankruptcies in September.

However, even Västra Götaland in western Sweden and several other counties had more bankruptcies in September compared with last year, but the vast majority of counties saw considerably fewer bankruptcies than the previous year.

Signs point to continued improvements in economic activity, especially in Stockholm, and for the first time since 2008, businesses in the region are increasing the number of employees they have.

The growing number of bankruptcies in September can be mainly attributed to the construction industry and trade and private service companies. However, so far in 2010, virtually all sectors have made substantial recoveries.

Wholesale and retail trade already took off last year, largely due to strong consumption-led growth, helping many trade enterprises avoid falling into insolvency. The private service sector is also among the industries during the year that has seen declining bankruptcies and believes increasing demand will continue in the future.

“The construction industry is a competitive sector in which bankruptcy vulnerability is higher than in many other industries. Within this sector, it was still very tough, but in recent months, it appears that the recovery has gained momentum,” said Sigbladh.

The economic development outlook for Swedish business remains positive for most aspects. At the same time, glimpses of European storm clouds are cause for concern, including high fiscal deficits and weak growth in some countries, affecting in particular Swedish export companies.

The number of companies in Europe that go bankrupt is expected to grow over the coming months and even if the Swedish economy is in a much better position than many other countries, it remains to be seen how business bankruptcies in Sweden will unfold.

Consequently, UC is maintaining a forecast of a 10 percent decline in business bankruptcies compared to last year.

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