Germany recorded 4,573 insolvencies among partnerships and corporations in the first quarter of 2026. That marks a level last seen in 2005, when 4,771 cases were registered. Even during the 2009 financial crisis, the figures were lower. The current rise is also unusually steep. In March, insolvencies stood 71% above the average for the years 2016–2019.
The trend is not confined to the margins of the economy. Construction and retail have been particularly hard hit. Both sectors have faced sustained pressure, as rising financing costs, high energy prices and weaker demand converge. At the same time, consumption has stagnated in many areas, while construction projects have stalled amid higher interest rates and surging costs.
The regional picture underscores the severity of the situation. Bavaria, Baden-Württemberg and North Rhine-Westphalia are reporting record levels. Those are precisely the federal states regarded as industrial centers and long seen as pillars of stability. The fact that insolvencies are rising most sharply there suggests that the problems are no longer limited to individual sectors but are reaching the core of the economy.
Another finding sharpens the picture. The rise in insolvencies is driven primarily by smaller companies. The number of affected employees has recently declined, even as bankruptcies increase. Many smaller firms are therefore giving up earlier, lacking the financial reserves to withstand prolonged downturns. Economists see this as an early warning signal. Small firms tend to react more quickly to economic disruptions. When they fail in large numbers, it often points to a broader deterioration that later reaches larger companies.
Companies Scale Back Production and Investment
Alongside rising insolvencies, companies’ assessment of their business situation has deteriorated markedly. Some 43% report that their business is worse than a year ago, while only 14% see an improvement. This assessment spans almost all sectors of the economy.
Expectations for the coming months remain subdued. Around 35% of companies anticipate falling production, while just 21% expect an increase. In industry, the picture is particularly clear: 39% expect a decline, compared with 24% forecasting growth. Even in the services sector, long regarded as a stable pillar, scepticism now prevails.
The trend is even more pronounced in investment and employment. Nearly 40% of companies plan to reduce investment, while only 21% intend to increase it. In industry, the gap is especially wide: 42% are cutting investment, compared with just 19% raising it. The labor market also reflects a defensive stance. In industry, 37% of companies expect to cut jobs, while only 14% plan to hire.
These figures paint a picture of an economy that is increasingly retreating. Companies are avoiding risk, postponing projects and preserving liquidity. Growth prospects are receding into the background as stabilization becomes the priority. That retreat is further reinforcing the cyclical slowdown, as less is invested and produced.
Geopolitical Risks Hit the Business Model
Internal challenges are being compounded by a tense geopolitical environment. The war in the Middle East is acting as an additional burden. Rising energy prices, disrupted supply chains and uncertainty in global markets are hitting Germany’s export-oriented economy particularly hard.
A key factor is the Strait of Hormuz, through which a significant share of global oil and gas shipments passes. Restrictions on shipping are driving up energy and transport costs. For German companies reliant on stable supply chains and predictable prices, this represents a major disruption.
“The Iran war has choked off hopes of a genuine economic recovery at an early stage”, said Michael Groemling, head of macroeconomics and business cycle research at the German Economic Institute (IW), in the institute’s April 2026 business survey. The disruption of key trade routes such as the Strait of Hormuz is directly affecting supply chains, pushing up energy and transport costs and weakening exports.
For nearly three years, companies have taken a predominantly pessimistic view of the future. A phase of negative expectations of this length was last seen two decades ago. The current wave of insolvencies is therefore not merely a short-term spike but the expression of a deeper trend.
The combination of rising bankruptcies, falling investment and geopolitical pressure leaves little room for optimism. Leading indicators suggest that the elevated level of insolvencies could persist in the coming months. The crisis is thus becoming entrenched, taking on increasingly structural characteristics and posing a fundamental challenge to Germany’s economic model.