Crisis Brings 43 Companies to their Knees in the Liberec Region

Liberec, 11 June (CTK) – Forty-three companies ended in bankruptcy in the Liberec Region last year due to, among other things, the current financial crisis. Nationwide, this amounted to 855 companies, which means the region made up four percent of the total number of companies.
However, Liberec is one of the smallest regions in the Czech Republic, and according to analysts the number of bankruptcies exceeds the regional average. According to the Director of the District Chamber of Commerce, Martin Procházka, this is because companies here are closely tied to sectors hit by the crisis, in particular, the glass, jewelry and automobile industries.
"Companies in other fields, which are indirectly tied to these problem sectors, are also failing. For example, catering companies, whose services are used by companies in the automobile industry," explained Procházka.

According to Pavel Finger, a member of the Board of CCB - Czech Credit Bureau (CCB), which operates the business information portal CRIBIS, the bankruptcy rate of legal entities in the Liberec Region was 0.63 percent last year. “This is more than the national average, which was 0.4 percent in the same period,” he added.

Another 14 companies in the region ended in bankruptcy in the first five months of this year. Analysts expect their numbers to grow significantly in the coming months as bankruptcy in the country as a whole rose by 20 percent during the first quarter compared to last year. While 350 companies failed in the first three months, approximately one hundred more are expected in the second quarter. However sole traders fail more often than companies.

The Liberec Chamber of Commerce recently conducted a survey among 100 randomly selected small and medium enterprises. "82% of these companies had encountered insolvency on the part of their customers and 41% had experienced a failure to deliver on the part of suppliers," added Procházka. In roughly one half of these cases, the companies suffered a loss as a result and found themselves in great difficulty to remain in business.

According to Finger, companies can protect themselves from the risks of the worsening economic situation by thoroughly vetting their business partners, although a survey showed that 92 percent of companies in the region already do so. However, almost two thirds of these companies rely on mere recommendations, just under one third from public resources and only eight percent rely on specialized companies. "A recommendation may be enough when looking for a nursery school for your child, however, this is not appropriate when verifying the financial situation of a company, which can change very quickly,” remarks Procházka.

According to the portal’s Business Manager, CRIBIS has information on 3.5 million subjects from across the Czech Republic in its register and can also find information on companies operating outside the Czech Republic.