What Can Credit Managers Expect in 2025?

In the year 2024 there were around 22,500 company insolvencies, which is the most since 2015. Even though this figure is a long way below the levels seen during the first decade of this century, the developments in some industries are alarming. Especially affected are the automobile supply industry, the building industry, the metal goods industry and mechanical engineering.

In addition, the vehicle construction industry continues to report reductions in new order volumes. In the areas of metal production and processing orders are also disappearing, which exacerbates the situation even further.

Some sectors, however, are showing the first signs of recovery. Mechanical engineering and the Chemical industry are seeing a small increase in new orders. The pharmaceutical industry is developing especially positively whereas the textile industry and its associated retailing must remain under critical observation.

With an estimated 56 billion euros of economic losses, the insolvencies in 2024 reached a new all-time high. This figure shows that it is not only small and medium-sized companies that are affected but also an increasing number of larger firms operating in industries with high competitive pressure and low liquidity.

In 2025 we will quickly see which companies are cutting their workforce through restructuring measures. This is likely to have a negative influence on consumer sentiment, especially in relation to larger private investments that can be put off until a later date. Short-time working allowance from the state is utilized by companies, but is regarded as problematic by economists because it can slow down the necessary adaptation processes and thus endanger competitiveness even further.

The situation remains especially challenging for energy-intensive companies that do not have fixed long-term price contracts for energy. Increasing energy costs can quickly lead to financial difficulties.

In the area of services, hospitals and care homes are under financial pressure, whereby the shortage of qualified workers is making their problems even worse. 

Another negative factor for companies is the increasing reporting obligations, which are a particularly heavy burden for small and medium-sized enterprises (SMEs). These resource-binding tasks could increase even further as a result of additional EU legislation. No relief can be expected here in the short term.

After the 2025 national elections in Germany it will be essential that the new government quickly introduces measures to support a positive investment climate. Tax reductions for particular investments could make an important contribution here.

Additionally, in the first quarter of 2025 we will see how the uncertainties on the international markets develop. Whether the situation will stabilize or worsen remains to be seen.

In this uncertain economic environment it is essential for companies to monitor their customer relationships closely. Special attention should be paid to customers with a weak liquidity situation and changes in payment behaviour.

Payment record pools can be helpful when evaluating customers. Credit insurers are also responding to the current situation carefully, which may result in limit reductions or cancellations for some companies. 

Credit management plays a central role in overcoming the current challenges. Warning signals from individual debtors must be consistently monitored in order to keep the payment collection rate high. This is the only way for companies to secure their liquidity and survive on the market in the long term.