Major companies in Turkey overwhelmed by financial burdens are forced to shut down. The number of companies opting for liquidation has risen by 16% during the first half of the year when compared to the same period last year. Additionally, a 3.6% reduction in the establishment of new companies signals growing unease among entrepreneurs.
The decision to liquidate a company signifies its entry into the closure process.
LIQUIDATION DECISIONS INCREASED BY 27%
As reported by Merve Yiğitcan from Ekonomim, companies grappling with dwindling working capital and diminishing access to financing are facing heightened risks due to the worsening economic landscape. The annual tally of liquidation decisions, which stood at approximately 13,000 as of June 2020, climbed to 15,476 by June 2021, further rising to 19,755 by June 2022, and reaching 23,689 by June 2023. This marks a 27% surge in liquidations during the second quarter compared to the corresponding period last year.
IMMINENT WAVE OF COMPANY CLOSURES
Despite a 4.7% decrease in the number of companies shuttered within the first six months of the current year, the upswing in liquidation decisions has fueled concerns about an impending surge in company closures. Moreover, the 16.2% uptick in closures of sole proprietorships from January to June highlights heightened vulnerabilities within small-scale enterprises.
TOBB’s monthly release of statistics on established and defunct companies serves as a vital indicator of the economic outlook. In the initial half of the year, while the number of newly formed companies dipped by 3.6% in comparison to the corresponding period the previous year, the count of firms ceasing operations also witnessed a 4.7% decrease over the same interval. Scrutinizing the landscape for individual commercial entities, the quantity of established sole proprietorships dwindled by 16% during the same timeframe, whereas the tally of closed sole proprietorships escalated by 16.2%.
DAMPENED ENTREPRENEURIAL ZEAL
The 3.6% contraction in newly established companies within the first six months of the year indicates a growing apprehension among entrepreneurs, causing a waning appetite for new business ventures. This trend has the potential to yield job losses in the medium and long term. Despite the 4.7% reduction in the number of closed companies during the January-June period, the finer data elucidates a crucial aspect regarding the escalating number of companies opting for liquidation—a significant detail that casts an impact on the economic trajectory. Given that a substantial portion of SMEs in Turkey sustain their commercial operations through external resources, challenges in accessing financing have precipitated the incursion of companies into the liquidation process. While the count of liquidation decisions was 10,291 in the first six months of the preceding year, this figure surged by 15.7% to reach 11,905 in the initial half of 2023. The strain of financial woes detrimentally affects companies with eroded working capital, and the upswing in liquidation decisions forebodes an even swifter pace of company closures in the impending period. Concerns of an impending wave of closures have pervaded the market for a while now.
HIGHEST LIQUIDATION RATES IN ISTANBUL
A perusal of liquidations by geographical distribution reveals that the number of liquidation applications closely aligns with the economic scale of cities. In the first six months, Istanbul led with the highest number of liquidation decisions—5,632—whereas the figure for the same period in the previous year was 5,035. Ankara followed with 1,045 liquidation applications. The data illustrates an 8% increase in liquidations in Ankara when contrasted with the previous year. İzmir, Bursa, and Kocaeli trail behind these two cities.
MAXIMUM CLOSURES IN THE CONSTRUCTION SECTOR
An analysis of the activity domains of closed companies unveils that the sector witnessing the highest closure rate across all types of companies is the ‘construction of residential or non-residential buildings’. Following this, it’s electricity generation in public companies, restaurants and mobile catering services in limited companies, and retail trade activities, emphasizing food, beverages, or tobacco, in unspecified shops for sole proprietorships. The third most affected field is computer programming in public companies, wholesale trade in unspecified shops for limited companies, and retail trade conducted via mail or the internet for sole proprietorships.
This news article originally was published in Bold Media and translated into English by Politurco.