In 2020, Bulgaria registered a decline in the number of bankrupt firms because the procedures were hampered by the pandemic. In the first four months of 2021, the number of companies that ceased operations increased by 15.2% compared to the same period of 2020.
Yet this is not such a bad figure if you consider several factors. First, it probably reflects the pandemic 2020 when everything (bankruptcies included) was put on hold. Second, at the same time, more and more people want to start a business, judging by the number of newly registered firms which rose 21.4% above last year's level, according to data provided by the Registry Agency in response to an enquiry by Capital Weekly.
And third, Bulgaria is not an outlier. A similar trend is visible at the European level in the first quarter of this year. According to Eurostat, the number of newly registered companies grew by close to 12% by the end of March, compared to the first quarter of 2020, whereas bankruptcies increased by 7.3%. According to Eurostat, the relatively mild increase in the number of bankrupt companies can be explained by the measures in support of businesses implemented during the crisis which enabled many companies to continue their activities.
Leaving the business
During the period of January-April 2021, a total of 3,777 companies ceased operations in Bulgaria. The number includes firms deleted from the national Commercial Register, enterprises for which insolvency procedures have been initiated, companies in liquidation, or those that have gone bankrupt.
For comparison, in the same period in 2020 the number of companies that ceased operations was 3,278. At the time, there were barely any measures in support of businesses but many companies were waiting to see how the situation would develop in order to decide on their next move. Also, court procedures were hampered by the lockdowns.
This year, the most significant increases in the number of bankruptcies have been reported in the regions of Vratsa, Pernik, Kyustendil, and Pazardzhik (between 55 and 65%). At the same time, seven regions reported a decline in bankruptcies, including Sofia (the region surrounding the capital city) which registered a decrease of close to 36%. In Gabrovo, the indicator remained unchanged.
Amidst the higher number of terminated businesses, the number of newly created ones has also increased. In the first four months of 2021, 15,218 new companies were registered in Bulgaria, which is close to 2,700 more compared to the same period last year.
Almost all regions had a double-digit growth rate, the most significant being in Sliven (nearly 56%), and only Gabrovo and Vidin reported a minimal decline. As every year, the largest numbers of newly registered companies were reported in the capital, Plovdiv, Varna, and Burgas. At the other end was Vidin with only 90 new firms.
Quarterly trends in Europe
In the EU, the number of newly registered companies grew between 2015 and early 2020. The trend, unsurprisingly, broke in the second quarter of 2020 but resumed in the third. In the same period, bankruptcies followed the opposite trend of decline, right before jumping sharply in the third quarter of 2020. Since then, they've been on the rise.
Country data show that Bulgaria is one of the countries with the largest increase in newly registered companies in the first quarter of 2021 compared to the last quarter of 2020 - 12%. Among other member states, only Lithuania reported a higher growth rate (16.2%), whereas countries like Slovakia and Portugal reported double-digit declines.
In terms of bankruptcies, the sharpest increase is in Romania (72.1%), and at the other end is Latvia with a decline of 42.2%. Bankruptcies in Bulgaria decreased by 5.1% on a quarterly basis in January-March 2021.