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Global Insolvency Outlook: 
Navigating the economic tightrope

Allianz SE | Munich | Oct 17, 2023

In this newly published report, Allianz Research explores the current economic landscape, profitability woes, and potential insolvency that grips these industries.

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The Report

Imagine a daunting high-wire act. The performer, precariously balancing on a thin rope, represents businesses in 2023 as they face an unenviable financial juggling act. In a world of economic unpredictability, sectors like hospitality, transportation, and retail are navigating an economic tightrope. 

In their newly published report "Global Insolvency Outlook 2023-25: From maul to ruck?", Allianz Research explores the current economic landscape, profitability woes, and potential insolvency that grips these industries.

The 2023 cash dilemma 

As we enter 2023, many non-financial companies in the Eurozone and the U.S. have a substantial cash cushion, well above pre-pandemic levels, with approximately EUR 3.4 billion in the Eurozone and USD 2.5 billion in the U.S. However, this financial safety net is mostly in the hands of large firms in industries like tech and consumer discretionary, leaving others exposed.

Faster cash erosion than economic growth

While cash reserves remain high, they are diminishing faster than the actual business activity. This affects not just sectors already facing tough times, such as hospitality, transportation, and wholesale/retail, but also industries like construction, which have almost finished their backlogs, particularly in residential projects.

Profits under pressure

Companies are feeling the pinch as their revenues drop. Reduced pricing power and weaker global demand have led to a broad-based revenue recession across all regions, which hasn't happened since mid-2020. This means companies are quickly losing their financial cushion, and there's no quick turnaround in sight; likely not before 2025.

Rising costs and shrinking profits

Companies are grappling with stagnant commodity and supply chains while labor costs are a hurdle, especially for businesses catering to consumers and construction. This is putting a squeeze on profitability, with global earnings per share dropping by -1.1% year-on-year in the second quarter of 2023.

Interest rates and worries about solvency

The higher-for-longer interest rates are making life harder for sectors like real estate and durable goods. It's also causing problems for companies with high Working Capital Requirements (WCR; machinery and transport equipment, pharmaceuticals, electronics, construction). Globally, these requirements have hit a record high of 86 days due to rising prices and shifts in supply chains. Although the upcoming price slowdown may help reduce the financing gap, companies are likely to face delays in getting paid in the coming months.

Struggles in dealing with insolvency and payments

While Allianz researchers don't expect significant changes in the rules for handling business insolvencies over the next two years, some large economies have already introduced measures to deal with debt troubles and early restructuring. As it stands, there are no further discussion on strengthening these measures as the emphasis is on improving tax collections through methods like e-invoicing. However, there are efforts to encourage timely payments and better monitoring of payments across Europe, particularly as Global Days Sales Outstanding (DSO) exceed 60 days in nearly half of all companies. 

The implications for businesses and SMEs

Late payments, especially in the current global environment, are likely to get worse in 2024, affecting supply chains. Some companies might favor non-European suppliers with longer payment terms, which could be detrimental to fragile firms, particularly SMEs. Allianz researchers estimate that 15% of SMEs in the UK, 14% in France, 9% in Italy, and 7% in Germany are at risk of default due to weak financial foundations.

What lies ahead for business insolvencies

Looking forward, Allianz researchers expect that three out of five countries will return to pre-pandemic business insolvency levels by the end of 2024. By the end of 2023, most advanced economies will have normalized business insolvencies, with a significant increase seen in several countries. Further increases in business insolvencies are expected in 2024, with growth figures needing to double to stabilize on both sides of the Atlantic, which likely not happen before 2025.

In the challenging landscape of 2023, it's evident that diverse sectors face liquidity and solvency challenges. With broad-based revenue declines, dwindling profitability, and the specter of rising insolvencies, businesses must navigate a complex environment as they strive to adapt and thrive.

For a deep-dive into the challenges of corporate resilience, read the newly published Allianz Research report here 
Download Report: Global Insolvency Outlook
Download the Report (PDF, 758 KB)
Title page of report

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About Allianz

The Allianz Group is one of the world’s leading insurers and asset managers, active in almost 70 countries and serving around 97 million private and corporate customers*. Allianz customers benefit from a broad range of personal and corporate insurance services, ranging from property, life and health insurance to assistance services to credit insurance and global business insurance. Allianz is one of the world’s largest investors, managing around 764 billion euros** on behalf of its insurance customers. Furthermore, our asset managers PIMCO and Allianz Global Investors manage about 2.0 trillion euros** of third-party assets. Thanks to our systematic integration of ecological and social criteria in our business processes and investment decisions, we are among the leaders in the insurance industry in the Dow Jones Sustainability Index. In 2025, over 156,000 employees achieved total business volume of 186.9 billion euros and an operating profit of 17.4 billion euros for the Group.

* Customer count reflects Allianz customers in consolidated entities that are part of the customer reporting scope only.

** As of December 31, 2025.

Cautionary note regarding forward-looking statements

As with all content published on this site, these statements are subject to our cautionary note regarding forward-looking statements:

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