Since 2012 around 1,900 companies a year have opted to go bankrupt in the past decade; that’s an average of around 160 a month going out of business.
Already 1,669 firms have shut down in the first ten months of 2021, following the trend building up over the past decade.
Despite the tools provided to businesses by the Insolvency Service and COVID-19 support schemes, some appear to opt for bankruptcy.
More than 19,000 voluntary liquidations have taken place in Cyprus in the last decade, according to the data of the Insolvency Service, while the liquidation decrees of companies exceed 1300.
Data from the state Department of Insolvency shows that total voluntary liquidations in 2020 were 2,235, up from 2,097 in 2019, 2,378 in 2018 and 2,497 in 2017.
This year, 148 voluntary liquidations took place in October 2021, 164 in September, while in August, the number was 108.
In July, 158 companies closed down, 204 in June and 139 in May; they hit a peak of 207 in February.
In the first ten months to October, the voluntary liquidations amounted to 1,669 compared to 1,6750 last year.
The issue of businesses declaring bankruptcy is not a Cyprus phenomenon as the rest of the European Union is witnessing similar trends.
The President of the European Central Bank, Christine Lagarde, has often spoken out about the need for banks to stop funding “zombie” businesses, that is, non-viable businesses with very high debt levels.
Lagarde said businesses survive thanks to low-interest rates and banks’ refinancing and business support measures by governments during the pandemic.
She has repeatedly stressed that the target of liquidity injections was households and healthy businesses.
But the banks have injected significant amounts of cash into keeping problematic businesses afloat to avoid large losses, negatively impacting capital and their profitability.
The ECB considers that loss-making companies block a faster recovery and growth following the pandemic.
It is asking banks to lead these companies to bankruptcy or face the danger of overexposing due to these “zombie” companies, endangering the union’s banking system.