Dramatic rise in bankruptcies

The number of Swedish firms going bust in March increased by 85 percent, in comparison with March 2008, according to a new report from credit rating agency UC.

“This is due to the weakening economy and the decline of private consumption in these worrying times,” UC’s Fredrik Polland said on Tuesday.

Worst hit by the wave of bankruptcies are newly started small and medium-sized retail firms in Stockholm, Gothenburg and Malmö.

“Many new stores and shopping centres have been established recently. When market demand declines there are not enough customers to go around. It is particularly apparent in the major cities where there are a large number of retailers.”

The situation was compared by UC to the crisis that hit Sweden in the beginning of the 1990s.

“The growth in bankruptcies that we are now seeing casts my mind back to the crisis at the beginning of the 1990s,” according to UC’s Roland Sigbladh.

Sigbladh warned though that the dramatic change on March 2008 should be placed in the context that last year experienced the lowest level of company failures in modern times.

“The crisis in the 1990s involved many more bankruptcies and differed from today with as there were property company failures. But the rate of the increase is familiar from that period,” Sigbladh said according to a UC press release on Tuesday.

Bankruptcies increased by 51 percent over the course of the first quarter.

1,909 companies filed for bankruptcy during the first quarter, 735 in March.

So far the rate of bankruptcies is lower than in 2003, in the wake of the IT stock market bubble. But UC forecast that these levels would soon be exceeded.

“But the proportion of company failures has some way to go to beat 2003. The large number of companies today is also in itself a significant explanatory factor behind the dramatic rise in bankruptcies,” according to UC.

Aside from retail the transport sector and the metal industry are the sectors which have been hit hard by the wave of bankruptcies.