Denmark Braces for Record Number of Bankruptcies As Inflation, Energy Crisis Bite

A total of 331 companies filed for bankruptcy in Denmark in November, which is the highest number in 13 years, a new report published by SMVdanmark, the country’s main business organization that represents small and medium-sized enterprises, has said, Sputnik reported.

Since summer businesses have been “hit hard by high inflation, soaring energy bills and, not least, fears about the future of the economy, which have sent consumers' appetite for buying into a tailspin”, SMVdanmark, which represents 18,000 businesses across the country, said.

The report stressed that many businesses were already struggling with backlogs from the COVID-19 pandemic even before the energy crisis settled in.

“Never in the history of statistics have we seen so many bankruptcies among businesses with employees. This means that the crisis is hitting real businesses with turnover and employees”, SMVdanmarkanalyst Lasse Lundqvist said in a statement.

While the wave of bankruptcies has affected all types of businesses, construction and retail industries have been hit particularly hard. More than half of the bankruptcies in November were in the construction sector. Despite the number of enterprises closing down reached a decade-high, specialists envision more to come.

“Unfortunately we will see even more bankruptcies in the coming months”, Lundqvist concluded. He envisaged “rising unemployment” and “sad pedestrian streets” as many shops will have to close down.

When surveyed about their expectations for the future development, six out of seven of Denmark’s largest banks said they expected more business customers to seek help in the form of new loans in the coming winter. Furthermore, numerous Danish companies are still repaying their COVID-19 loans, while their business conditions have severely deteriorated due to energy crisis.

According to Statistics Denmark, consumer prices have been rising at the steepest rate observed since November 1982, with inflation reaching 10.1 percent in October. Higher prices for electricity, food, gas and fuel were named the main factors of the high overall inflation.

Economists called it “terrible” news, as the sharp increases are gnawing their way through the households’ budgets and sinking Danes’ purchasing power, resulting in a vicious circle for the economy.

Despite being celebrated as the poster child of green energy, where renewables with above all wind power account for nearly half of overall energy consumption, Denmark has also been hit by the crisis that engulfed Europe as a result of Brussels’ ill-conceived decision cut energy imports from Russia as “punishment” for its special operation in Ukraine.

As many countries across the continent, Denmark saw a massive price hike earlier this year and took steps such as dialing down heating in public buildings throughout the country. Danes have been encouraged to save energy by the authorities by turning down the heat, limiting the use of hot water and switching off unnecessary lighting and appliances.