A recent slowdown in bankruptcies in Poland -lasting trend or temporary phenomenon?
KUKE has published its monthly report on the state of declared bankruptcies and opened restructuring proceedings in Poland and noted a significant slowdown of bankruptcies, with only 38 companies being declared bankrupt in June 2019. The total of all bankruptcy and restructuring proceedings opened in June is 66. This is 9,5% fewer bankruptcies than in May 2019 and 17,6% fewer restructuring proceedings. This led the KUKE analysts to assume that due to the positive state of the Polish economy, 2019 may be a year with fewer bankruptcies and restructuring proceedings than the year before.
Every year is the same, and every year the comments are similar. We are obviously unfamiliar with the workings of the Ockham’s razor and try to see patterns that are not there. June, July and August are holiday months and all Polish courts have 50%-75% staff taking their holiday leave. There are less bankruptcies declared simply because there are not enough judges and administrative staff around to declare them. Have you tried getting anything done in Polish bankruptcy courts during the holidays? No reason to open tenders – why? Nobody will come to the auction, because they’re on holiday. No documents signed – why? The judge is on holiday.
And this is not just a court thing – every enterprise and state organization has this slowdown, simply because if you have kids, your holiday time is limited to the holiday break they have each summer.
And each year we see slowdown in court cases and claim this is a permanent thing. It is not, we will see the true strength of the economy in September and October when everybody returns from their holidays and starts to deal with their companies financial situation at hand.
It would be wonderful to see a slowdown in bankruptcies in Poland in 2019, since this would mean fewer jobs lost, fewer companies evaporated from the market and better state of the economy. However judging by the state of developer and construction companies (look not at how many apply for bankruptcy – if you apply for bankruptcy you are usually long dead, but how many admit huge losses in their financial reports – this is always the first step and insolvency usually follows) the situation is not as rosy as everyone claims. Split payment (VAT), increased labour costs (social security rate increase, smaller workforce, rising wages, inflation), more tax audits, increase in electricity prices for businesses. This all takes its toll on the private sector and the dam will have to break someday.
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