1. Overview: Corporate insolvencies have fallen to their lowest level since 1999

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1 Corporate insolvencies have fallen by 6.2 percent - Insolvency losses have increased by over 50 percent / men lead companies into insolvency almost twice as often a women 1. Overview: Corporate insolvencies have fallen to their lowest level since 1999 The companies in Germany are benefiting from the continued stable domestic economy and from financing conditions that favour them. The parts with a weaker euro are also supporting export-oriented companies. There is also an effect in play that has come about due to the positive trend of recent years. Many companies have increased their capital in recent years, and thus can build up a crisis buffer for risk hedging. For the current year, the Bürgel credit bureau is assuming slightly declining corporate insolvencies. "Currently we do not see any reversal trend, and expect a decline in 2017 of 3.5 percent at 21,000 insolvencies," said Klaus-Jürgen Baum. However, this forecast is marked by risks in the form of international political and economic uncertainties, such as an impending Brexit, the change of government in the United States, and the elections in France and Germany. 1/9 Corporate insolvencies in Germany dropped in The number of bankruptcies decreased by 6.2 percent to 21,789 cases (2015: 23,222 company insolvencies). "By the seventh consecutive decline, company insolvencies fell last year to their lowest level since 1999," said Bürgel Managing Director Klaus- Jürgen Baum regarding the current figures. In the crisis of 2009, 33,762 and therefore about 50 percent more companies had to file for insolvency in Germany.

2 2. Financial losses due to corporate insolvencies: Insolvency losses have risen sharply The amount of losses caused by company insolvencies rose significantly in 2016, despite the declining number of cases. The insolvency losses totalled 27 billion euros in Compared to the year before, this is an increase of almost 54 percent (2015: 17.5 billion euros). Multiple collapses of economically important companies are responsible for this dramatic increase. Prominent examples from last year are the companies Steilmann, Sinn-Leffers, or German Pellets. On average, each company insolvency in 2016 amounted to a loss of approximately 1.2 million euros. The domino effect resulting from the high insolvency losses, for example on suppliers or partners, can also place previously stable companies into difficulty, thus leading to associated insolvencies. 3. Comparison of the federal states: Most of the bankruptcies are in Bremen and North Rhine-Westphalia The analysis of the insolvency density (company insolvencies per 10,000 companies) shows a slightly different result. Consequently, most cases were in 2/9 A look at the federal states shows that there are pronounced regional differences for company insolvencies. In absolute figures, North Rhine- Westphalia (6,678 company insolvencies), Bavaria (2,777), Lower Saxony (1882), and Baden-Württemberg (1,741) are at the top of the statistics.

3 North Rhine-Westphalia and Bremen with 100 insolvencies per 10,000 companies throughout Germany. The national average in 2016 was 67 bankruptcies per 10,000 companies. Saarland (98), Hamburg (95), Berlin (88), Schleswig-Holstein (86), and Saxony-Anhalt (79) clearly exceed this amount. Saxony (73) and Lower Saxony (69) are slightly above the average amount. The fewest bankruptcies in 2016 were in Baden-Württemberg, with 39 bankruptcies per 10,000 companies. However, companies also had to file relatively few insolvencies in Thuringia (44), Bavaria (46), Rheinland-Pfalz (49), and Brandenburg (55). 3/9

4 4. Large city ranking: Dortmund is the insolvency leader Apart from the federal states, Bürgel has also analysed the insolvency density in the 30 largest German cities. According to this analysis, the risk of insolvency in Dortmund is highest at 127 insolvencies per 10,000 companies. This is followed 4/9

5 by Essen (115), Duisburg (107), and Gelsenkirchen (104), three other cities in North Rhine-Westphalia. Munich is looking best in the big city ranking. In Munich the insolvency rate is at 48 bankruptcies per 10,000 companies. Ranking behind it are Nürnberg (49) and Stuttgart (51), two cities in southern Germany. 5. Percentage changes: Corporate insolvencies rose in four federal states The nationwide trend of declining company insolvencies was not seen in Saarland (plus 10.3 percent), nor in Brandenburg (plus 7.4 percent), Saxony (plus 6.7 percent), and Hamburg (plus 1.5 percent). There were significantly fewer bankruptcies in Rhineland-Palatinate in 2016 (minus 16.7 percent) and Thuringia (minus 15.3 percent). However, even in North Rhine-Westphalia (minus 8.8 percent), Saxony-Anhalt (minus 8.1 percent), and Bavaria (minus 8.0 percent), corporate insolvencies decreased more than the national average (minus 6.2 percent). 5/9

6 6. Company insolvencies in accordance with legal forms: Entrepreneurial companies (limited liability) are still at risk of insolvency An analysis of the legal forms shows their danger of insolvency varies greatly. Entrepreneurial companies (limited liability) had the highest risk of insolvency in In this case the insolvency density was 209 bankruptcies per 10,000 companies. However, stock corporations (114) and GmbHs (115) also have an 6/9

7 increased risk of bankruptcy. In absolute figures, the legal forms of commercial enterprises, sole proprietorships (39.7 percent; 8,659 cases), and GmbHs (39.1 percent; 8,533 cases) exhibit the largest proportions of insolvency in Germany. 7. Corporate insolvencies in the main sectors: The insolvency rate in the construction sector is at the highest The construction sector is at the forefront in the analysis of the main sectors, at 85 insolvencies per 10,000 companies. However, in logistics (83) and trade (70) the insolvency rate is also higher than the average. The services sector has the highest absolute amount of insolvency in Germany at 9,532 cases. The lowest insolvency density is 32 bankruptcies per 10,000 companies in the energy sector. 8. Corporate insolvencies by employee number: Small businesses affected by insolvency again A look at company size shows that in 2016 it was particularly small businesses that had to file for insolvency. The proportion of companies with at most 5 employees was 81.1 percent. The larger the workforce, the lower the proportion of insolvent companies. Furthermore, 7.7 percent of companies declaring insolvency had 6-10 employees. For companies with 51 or more employees, the proportion of overall insolvency dropped to 2.4 percent. 9. Corporate Insolvencies by company age: 58.9 percent of insolvent companies are not older than 10 years 14.9 percent of insolvent companies in Germany have been active on the market for only up to two years. The current study also shows that more than half (58.9 percent) of insolvent companies are not older than ten years old. The 7/9

8 reasons for the failure of young companies are primarily seen in the business idea. If it is not marketable or if the products are not produced efficiently, the company will have no chance of survival, and will have to file for insolvency. Another reason lies in the frequent difficulty start-ups have in obtaining financing. In addition, the company founders have to deal with market changes, strategic mistakes, and lack of expertise. 10. Point of interest: Men lead companies into insolvency almost twice as often as women In many subjects there is a comparison between men and women. The question of whether there are correlations between the success of the company and the proportion of women in management positions, how strongly such a connection comes into play, and what it depends on, has for years increasingly been the focus of equality-and economic policy discussions. The subject of company insolvencies has been excluded from this comparison thus far. Therefore, in their study the Bürgel credit bureau examined corporate insolvencies for the second time as to whether more men or women are leading the insolvent companies. The result is clear: men run companies more often into insolvency than women. This is supported by both the absolute and relative figures. For 17,277 of insolvent companies there was only one person in charge (Managing Director, owner, etc.) in the top management position. For 80.3 percent of these companies (13,883) that responsible person was male. For 1,951 of the insolvent companies, there were two decision-makers holding the top management position. For these companies also the proportion of men is higher than that of women. In 68.1 percent of the cases the insolvent companies were led by two men. By contrast, only 2.8 percent of the companies with two women managing were affected by insolvency. The remaining proportion (29.1 percent) pertains to companies with mixed management. Similar figures are present for companies with three people at the decision-making level. For 64.9 percent of insolvent companies all three managers were male. There were three female decision-makers for only 1.9 percent of the companies percent of the companies are characterised by mixed-gender management. The relative comparison is more interesting. To this end, the insolvent companies, including 8/9

9 the number of decision-makers, were compared with the total number of companies. Again, the result is clear. In almost twice as many cases, one or more men are at the head of an insolvent company. According to analysis, 79 per 10,000 companies with one or more male decision-makers file for insolvency - in comparison to only 41 per 10,000 companies with one or more women in the boardroom. Also, companies with mixed-gender management appear less exposed to insolvency (50 per 10,000 companies). 11. Causes of corprate insolvencies: Several triggers are jointly responsible for insolvency There are pronounced differences in the reasons for company insolvencies. In many cases, rather than there being just one cause of insolvency, several triggers are jointly responsible for the insolvency. The current economic situation is only one factor in the ultimate success or failure of companies. Bankruptcies also arise from other reasons, both internal and external to the company. Firstly, the main causes of company bankruptcies continue to involve the absence of new orders, or the cancellation or postponement of alreadyplaced orders. Secondly, domino effects insure that insolvent companies take other companies into insolvency with them. Thirdly, management errors are often responsible for an increased insolvency risk. Other relevant criteria include a lack of business planning, no controlling, or insufficient or absent credit management. Publisher: Bürgel Wirtschaftsinformationen GmbH & Co. KG, Gasstraße 18, Hamburg, presse@buergel.de, 9/9