Sweden swept by ‘major bankruptcy wave’ amid inflation, energy crisis

By Al Mayadeen English
Source: Agencies
3 Jan 2023 09:28
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The accelerating rate of inflation, the high electricity prices, and the number of bankruptcies in Sweden rose to the highest level during the second half of 2022.

The empty premise in central Stockholm, Sweden. Oct. 28, 2022. Source: Xinhua/He Miao.

The Nordic country is entering a long-term recession that is expected to last until 2025, with shrinking GDP and rising unemployment, according to the Swedish government.

According to the business and credit reference agency UC, the number of bankruptcies in Sweden reached a decade high in the second half of 2022.

Between July and December 2022, there were 22% more bankruptcies than in the same period in 2021, casting doubt on the post-COVID recovery and the early-year optimism.

By easing pandemic-related restrictions, Sweden observed the lowest number of bankruptcies on record in 2021. The year 2022 also started on a high note, but the situation quickly deteriorated.

Bankruptcy in Sweden

Nearly 3,500 businesses declared bankruptcy in the second half of the year alone, nearly 300 more than in 2013, according to UC, when the previous high was set. The proportion of bankruptcies was highest in hotels, restaurants, and retailers, with the figures generally worsening month after month.

The ongoing Ukraine conflict, the accelerating rate of inflation, and the high electricity prices that resulted from the EU's ill-conceived sanctions against Russia, which only exacerbated Europe's energy crisis, were blamed by the agency for the escalating bankruptcy crisis.

It also predicted a "tough 2023," with smaller companies facing "liquidity setbacks as a result of increased electricity and purchase costs, as well as interest." Furthermore, it predicted an increase in bankruptcies and a long-term decline in the number of startups.

“In hindsight, most things indicate that this is just the beginning,” UC economist Johanna Blome said in a press release, predicting “increased and more long-term effects” from the conflict in Ukraine.

Credit information company Creditsafe took a similar stance, calling the recent surge in bankruptcies "the start of a major bankruptcy wave." "The forecast is that bankruptcies will continue to increase in the coming years," Creditsafe CEO Henrik Jacobsson said in a statement, citing piling debts.

"Many companies that historically would have gone bankrupt survived the pandemic thanks to government support but with deferred tax liabilities that are creeping ever closer. Add to that higher interest costs, high electricity and fuel prices, and a recession. We are in an uncertain environment with extremely many warning signals," he concluded.

The Swedish government announced at the end of 2022 that the Nordic country was entering a long-term recession that would last until 2025. The country's GDP is expected to fall by 0.7 percent, while unemployment is expected to rise to 7.8 percent in 2023 and 8.2 percent in 2024.