Massive insolvency of French companies is a real risk, unions warn – EURACTIV.com

Reimbursing state-guaranteed loans and social security contributions is becoming increasingly difficult for many French businesses, especially small ones, with the risk of mass insolvency reaching an all-time high, unions have warned. country.

Read the original article in French here.

Maintaining business cash flow “no matter what” has been the government’s watchword since the start of the pandemic.

In March 2020, Economy Minister Bruno Le Maire announced €300 billion in state-guaranteed loans to ensure that “banks have no reason to refuse any loan to a company”.

In December 2021, 137 billion euros of these loans were granted to more than 660,000 companies, 88% of which are very small companies, according to the main French control institution, the Court of Auditors.

But while the regime has kept many businesses afloat, many are now struggling to repay state aid, the first installments of which had to be repaid in May.

Repayment of state-guaranteed loans “is conditional on a good economic recovery. However, at the end of 2021, the return to growth during 2021 seems to have impacted the firms very differently. reportpublished at the end of July, read.

Record inflation, largely driven by rising energy prices and supply chain disruptions, and the 3% rise in the minimum wage since the start of the year are making repayment even more difficult for these businesses.

900 € more per month

“Between the reimbursement of the PGE [state-guaranteed loan] and social contributions, companies have to pay an average of €900 more per month,” Jean-Guilhem Darré, general delegate of the union of self-employed and very small businesses, told EURACTIV.

For some, particularly in the restaurant and tourism sectors, repaying loans and paying social security contributions is almost impossible.

“Companies that used the device were in a slightly more difficult financial situation than the average company before the crisis,” explained the monitoring institution.

The Self-Employed and Very Small Businesses Union also warned of the risk of bankruptcies if the government did nothing to support the businesses most at risk.

The union bases its forecasts on figures released by the central bank, the Banque de France. According to a report34,653 businesses had to close shop in one year, up 23.1% from July 2021 but still below 2019 pre-pandemic figures.

According to the trade unionist, between 120,000 and 180,000 – or 20 to 30% – of very small businesses are in difficulty.

“If nothing is done, I don’t think they can last more than six to eight months,” Darré said.

“I have lost count of the number of business leaders who have stopped paying themselves a salary, so as not to cut into their cash flow,” he added.

French lawmakers agree on a 20 billion euro bill to curb inflation

French lawmakers in the lower house passed a government-sponsored emergency bill providing 20 billion euros to tackle inflation and the resulting social risks in the early hours of Friday (July 22) . The bill still requires Senate approval to become law.

not so worried

But the authorities do not seem particularly alarmed by the situation.

“We have not observed a significant increase in the loss ratio,” the economy ministry told EURACTIV, as around three out of four companies now have to repay the state-guaranteed loans they have taken. contracted.

The risk of business default will be “only between 3.1 and 4.2%”, while the central bank estimates this figure at 4.6%.

Most risky companies that have taken out state-guaranteed loans of less than 50,000 euros will be able to access mediation mechanisms to spread their repayments over time, according to an agreement concluded in February between the Ministry of the Economy, the central bank and the French Banking Federation.

“The use of mediation is very positive for the company because it benefits both from the restructuring of the state-guaranteed loan and other bank debts as well as from a short-term financing agreement which allows it to secure its cash flow over the next few years. years,” said Frederic Visnovsky, national credit ombudsman at the central bank.

Existing but contested solutions

But Darré disagrees on the benefits of mediation.

At the end of such a process, the central bank considers that a company has “failed in its payment, making access to new financing particularly complicated”. As a result, “business leaders are becoming reluctant,” he added.

“When you are in default, credit insurers withdraw, which means you have to pay your suppliers immediately, which only makes the situation worse,” François Asselin, president of the Confédération des PME, told the newspaper. French. South West end of July.

This could explain why only 304 cases have been filed for mediation since February, while a total of 288,000 state-guaranteed loans have to be repaid by companies.

“The fear of being declared in default may partly explain the low use of the mechanism,” Visnovsky told EURACTIV.

But companies’ lack of understanding of how default reporting works is also striking.

“If a company cannot ensure the repayment of its state-guaranteed loan installments (or other bank debts), it will be declared in default but without any restructuring, so it is in its interest to use the mechanism” , he added.

The unions nevertheless hope that the State will put in place new measures to make repayment obligations more flexible and intend to influence the next discussions in the French parliament this fall.

[Edited by Daniel Eck/Nathalie Weatherald]

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