Up to 19% of Spanish companies will be insolvent by end of year says Bank Of Spain

Up to 19% of Spanish companies will be insolvent by 2020, due to the economic impact from the COVID-19 pandemic, with one in ten also unviable, according to the worst-case scenario published today by the Bank of Spain.

Spanish companies have been among the most active in Europe in applying for state-backed credit and liquidity lines, but as in other European countries the focus is now switching towards solvency.

Earlier in November, the government approved an extension, until March, of restrictions on forced bankruptcies of companies affected by the pandemic to avoid the so-called cliff effect from the withdrawal of some support measures.

Businesses in the hospitality sector are particularly hard hit, with possibly as many as a third considered insolvent, the central bank said. Small businesses and motor vehicle companies are also under extreme financial pressure, it said.

Unviable companies – those expected to have negative results in the long term and therefore unable to meet debt payments – account for just under 5% of total company debt, with a similar weight in total employment, the Bank of Spain said.

But their fragility “is expected to have an impact on their creditors, logically including the financial sector”, the Bank of Spain’s chief economist Oscar Arce said.

The government last month approved an extension, until March, of restrictions on forced bankruptcies of companies affected by the pandemic to avoid the so-called cliff effect from the withdrawal of some support measures.

In line with this use of publicly guaranteed loans, the Bank of Spain sees a general increase in liquidity, particularly in the hospitality sector, and also an increase in the leverage of companies, but a decrease in the financing cost.

Financial expert Gunther Houseman although expects the figure to be even higher, based in Marbella, on the Costa del Sol he told Global247news: ” I feel they are being conservative with the figures, my prediction is 30% at the current rate, with many of those businesses being British and German owned whilst registered in Spain as SL companies, also on top of that I do not feel the Bank Of Spain have incorporated into their figures ‘sole trading businesses’

 


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