The number of businesses that have gone bankrupt in Germany in the first three months of 2025 is as high as it has been at any point in the past eleven years. But which companies are being hit the hardest? And how likely is it that the situation will calm down soon?

“The storm of bankruptcies continues.” That is how the news agency Reuters quoted Volker Treier, chief analyst at the German Chamber of Commerce and Industry (DIHK), last Friday: “Small and medium-sized enterprises in particular are facing problems.”

A DIHK survey showed that nearly one in three companies with fewer than 20 employees fears a deterioration in its financial situation. These businesses account for about 85% of all companies in Germany.

On the same day (12/12/2025), the Federal Statistical Office announced that by the end of September, German courts had reported 18,125 applications for corporate insolvency—almost 12% more than in the same period of the previous year. As a result, the number of bankruptcies in Germany in 2025 is the highest in the past eleven years.

The smaller the business, the greater the risk

The fact that small businesses are particularly exposed is also confirmed by Professor Steffen Müller. Bankruptcies occur “to a large extent in the small-business sector,” said the head of insolvency research at the Leibniz Institute for Economic Research Halle (IWH) in an interview with DW. In terms of employee numbers, “the average is 10 people, but most companies are even smaller.”

Even though this is not the focus of the analysis, the current “storm” of bankruptcies is also evident in personal finances: in Germany, the number of personal bankruptcies also rose last year. In the first three months of the current year, 57,824 consumer insolvencies were recorded—an increase of more than 8% compared with the previous year.

Impact on the labor market

Although the curse of bankruptcy mainly affects small businesses with few employees, the rise in bankruptcies among sole proprietorships and corporations has led to a significant increase in the number of jobs being lost or at serious risk. This was calculated by the IWH. The institute estimates that around 170,000 jobs will be lost in 2025. Before the COVID-19 pandemic, that figure was below 100,000.

Klaus-Heiner Röhl, an economist at the German Economic Institute (IW) in Cologne, warns against overestimating the impact on the labor market. As he told DW, “Bankruptcies contribute to a slight increase in unemployment, but the development is not dramatic.”

Steffen Müller sees it differently. According to his calculations, in 2025 “around 200,000 jobs will be affected—and that is quite a high number. Before the pandemic, it was about half that.” Some of the affected jobs “will actually disappear, because bankruptcies lead to business closures.”

However, he also emphasizes that many jobs will be created elsewhere. The effects on the labor market are “generally manageable. We should not forget that when the market stabilizes, there are often shifts from weaker to stronger companies.”

Expected developments?

For Steffen Müller, the current figures are not entirely unexpected: “Overall, the increase in bankruptcies was to be expected. What is surprising, however, is the scale of the increase.”

Klaus-Heiner Röhl says he was not surprised, as he told DW: “Basically, the development was foreseeable. Given the persistent weakness of the economy, the number of bankruptcies could even be higher.”

According to Röhl, the reasons for the many bankruptcies do not lie solely with entrepreneurs: “The main reason appears to be the weak economy of the past nearly three years, with an economy that has remained stagnant or has begun to decline.” Energy prices, Russia’s war against Ukraine, and the transition to climate neutrality are also contributing to the difficulties companies face. However, he adds: “To what extent politics and delayed reforms, as well as some companies’ delayed adjustments, have contributed to the problems is difficult to quantify.”

Steffen Müller also does not want to place all the blame for the crisis on businesses: “The reasons for insolvency are always very individual.” Difficulties often arise from individual mistakes, such as poor product choices, conflicts between management and staff, or disputes with major shareholders or other stakeholders.

“When,” as Müller says, “higher costs, structural changes, geopolitical uncertainties, and tariffs are added, individual weaknesses and mistakes lead more quickly to bankruptcy.” His conclusion: “It should not be a common occurrence for healthy and well-organized companies that are among the best in their sector to be forced out of the market solely because of worsening conditions.”

A faint glimmer of hope

The Association of Insolvency Administrators and Trustees in Germany (VID) views the situation with relative calm.

VID chairman Christoph Niering told the dpa news agency: “After the rebound effects from the pandemic and the increase in bankruptcies, the situation is returning to normal levels.” However, this “does not represent a trend reversal, but rather light at the end of the tunnel.”

Similarly, Steffen Müller estimates: “In 2026 we will be at roughly the same high level as in 2025.” However, this is “only partially good news, as we have gradually reached the red zone.” Nothing worse should happen. Because a look at the key categories of sole proprietorships and corporations shows: “We were at roughly the same levels 20 years ago.”

Economist Klaus-Heiner Röhl of the IW sees a ray of hope: “If the economy grows by about 1% next year, as various institutes expect, then the phenomenon of bankruptcies could ease.” However, this is not a given: “Structural problems such as U.S. tariffs, competition from China, and energy costs remain.”