Unprecedented debt in Austria reaches billions, a first
In 2025, Austria is grappling with a surge in corporate insolvencies, a trend largely attributed to rising financing costs, ongoing economic weakness, and the expiration of pandemic-related government support measures. These factors have strained companies' liquidity and ability to service debt, leading to more insolvencies.
Key causes of this rise include higher financing costs due to tighter credit conditions and inflationary pressures, an economic slowdown that has reduced business revenues and profitability, and the end of government support programs, such as phased payment agreements for Covid-19 debts. This has led to a doubling of court liquidations when firms fail to meet these obligations. Additionally, there has been a 37% increase in receiverships due to the increasing reliance on alternative lenders.
The potential impact on the Austrian economy is significant. Increased corporate failures may lead to job losses and reduced business investment. Rising insolvencies can increase financial sector risks, especially for lenders exposed to distressed companies. Reduced business confidence could dampen economic growth prospects. However, some reports suggest that insolvencies may stabilise or slightly decline after 2025, indicating a possible normalisation following the sharp increases post-pandemic.
One of the most affected sectors is construction, with companies like Tutic Bau, Süba AG, 6B47, and GR Real among the top ten corporate insolvencies. These insolvencies have resulted in the loss of thousands of jobs and liabilities totalling billions of euros. For instance, the Signa Insolvency, which involves Signa Prime Capital Invest GmbH and Herkules Holding, has liabilities of 1.33 billion euros.
The Signa Insolvency also includes the Vienna Luxury Hotel, the sale of which could bring in up to 110 million euros. However, not all insolvency procedures have been successful. Approximately 1,500 insolvency procedures were rejected due to lack of assets.
Gerhard Weinhofer, CEO of Creditreform, which represents creditors, announced 2,170 insolvency procedures in the first half of the year. This makes 2025 a record year for corporate insolvencies in Austria, surpassing the numbers seen even in the Second Republic's history.
One of the hardest-hit companies was Palmers Textil AG, which had 515 employees affected in the insolvency. Other companies like Teufelberger had 186 employees affected.
As Austria navigates through this challenging period, efforts are being made to support businesses and mitigate the impact on employment. The rise in corporate insolvencies underscores the need for continued vigilance and proactive measures to ensure economic stability in the country.
Personal-finance management becomes crucial as Austrian companies, faced with soaring financing costs, debt burdens, and economic downturn, resort to debt-management strategies to stay afloat. The rise in corporate insolvencies, involving companies like Tutic Bau, Süba AG, 6B47, and GR Real, threatens to increase unemployment, financial sector risks for lenders, and potentially dampen the economic growth prospects.
