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Bankruptcies fall in first half of 2010

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09:32 CEST+02:00
Bankruptcies in Sweden declined by 14 percent in the first half of this year compared to the corresponding period of last year, credit reporting company UC reported on Tuesday.

By far the biggest fall was in the trade, private services and construction sectors, the report said. The number of bankruptcies in the first half of 2010 was 3,305 pieces, down 14 percent from 2009. Most industries in many counties reported a declining number of bankruptcies.

In June, 613 companies declared bankruptcy, a decrease of 10 percent, further strengthening the positive trends that have emerged in 2010. As a result, UC maintains its projection of a 10 decline in bankruptcies in 2010.

"After a 2009 with a tough recession and pitch-black bankruptcy figures, the economy is now clearly on the upswing," wrote Roland Sigbladh, marketing director at UC, in a statement.

"A lot of companies have fallen by the wayside, but many have been able to increase orders, strengthen profitability and receive a stable cash flow. The companies that have survived so far have, in many cases, managed through the worst times," he added.

Many industries now see an increase in demand. The construction industry, long negatively impacted by the worsening economic situation, has recovered significantly, which is reflected in the bankruptcy figures.

Even in the private services and transportation industries, bankruptcies have declined so far this year. The wholesale and retail trade, which was among the first to be drawn into the recession, has been one of the locomotives in the economic recovery, although growth rates in recent months have slowed.

"Compared with most Western countries, Sweden is relatively strong, with good public finances, higher growth and an exchange rate that is expected to benefit the Swedish export industry," wrote Sigbladh.

Stockholm county, which was drawn late into the crisis, has in recent months seen a decline in the number of bankruptcies, as have most of the country's regions.

Skåne county, along with certain other counties, went against the grain this month, but over the years, most counties have witnessed fewer bankruptcies.

The largest companies that have gone bankrupt in 2010 had between 150 and 250 employees with net sales of between 250 billion kronor ($32.65 billion) to 700 billion kronor. Primarily, over the last six months, the bankruptcies took place at small businesses with several employees and revenues of several million kronor.

"In most cases, they involved companies that had been operating for five to six years that did not manage to build up their reserves and were hit particularly hard when the market took a downturn down and orders declined," said Sigbladh.

One cannot ignore that the financial problems across Europe may have implications for Sweden. However, most signs now point in a positive direction for the Swedish economy.

Combined with the labour market situation showing signs of improvement, despite the hike in interest rates, consumers are expected to contribute to the growth of Swedish companies.

As a result, UC's prediction of a 10 percent decline in bankruptcy for 2010 remains unchanged, representing over 6200 companies going bankrupt this year.

"One should bear in mind that bankruptcy figures in the first half of 2009 showed a dramatic increase, since the economic blow did not come until the fall of 2008," said Sigbladh.

"The first six or seven months of 2009 are being compared with relatively low numbers, which, of course, may be reflected in the statistics for 2010. We expect to see reductions in bankruptcies, even in the autumn, but hardly to the extent we have seen so far this year," he added.

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