Insolvencies to Increase in 2020
Insolvencies across the globe will increase in 2020, mainly as a result of the coronavirus epidemic. According to credit insurer Atradius, corporate insolvencies in advanced economies are expected to increase 2.4% this year, up 1% from 2019. Business failures in the U.S. will level off at 2% in 2020, down from 2.5% the previous year.
"The outbreak of the coronavirus though is compounding the challenges to global trade and manufacturing, by weakening Chinese imports and tourism and causing disruption to global supply chains," states Atradius.
Meanwhile, the most recent data from the American Bankruptcy Institute reports Chapter 11 filings increased in January compared to January 2019; however, this is prior to the large COVID-19 outbreak in the U.S. Commercial Chapter 11 filings nearly doubled year over year.
The retail sector has been hit extremely hard in recent years, which includes Toys R Us, Gymboree, Sears and Papyrus. The latest business to be hit by bankruptcy is East Coast sporting goods store Modell's, which filed for Chapter 11 earlier this month. America's oldest, family-owned sports retailer will close all of its stores.
Coresight Research CEO Deborah Weinswig believes retail closures could worsen exponentially, telling CNBC they could double compared to last year if COVID-19 continues to run its course. Starting outside the U.S., businesses were shut down in China and eventually Europe as the virus continued to spread. Now, companies such as Apple are closing doors in the U.S., while others are reducing store hours. State governments are also limiting potential exposure with social-distancing-mandated business closures from bars and restaurants to gyms and movie theaters
-Michael Miller, managing editor