Bankruptcy declarations across the European Union rose in the second quarter of 2025, even as the number of new business registrations accelerated to one of the highest levels seen in recent years.

The figures, released by Eurostat on August 18, painted a picture of an economy marked by both entrepreneurial dynamism and lingering financial fragility.

According to the data, the number of companies declaring bankruptcy increased by 1.7 per cent between April and June compared with the first quarter of 2025.

Over the same period, registrations of new businesses grew by 4.6 per cent, reversing the decline recorded at the start of the year.

Both measures now stand above levels observed between early 2018 and the third quarter of 2024, underlining the unusual coexistence of growth in start-ups and rising insolvencies.

Sectoral data showed a sharp divide. The largest increase in bankruptcies was in information and communication, up 13.6 per cent, followed by construction with a rise of 8.1 per cent.

By contrast, accommodation and food services saw a fall of 7.5 per cent in insolvency declarations, while trade registered a decline of 3.7 per cent.

Bankruptcy declarations varied just as widely. Latvia experienced a surge of 70.7 per cent, Cyprus rose by 66.8 per cent and Slovakia by 20.1 per cent.

Meanwhile, Estonia recorded a sharp fall of 28.7 per cent, with Spain down by 8.3 per cent and Sweden by 8.1 per cent.

Eurostat cautioned that small economies can show particularly volatile results, as relatively minor changes in absolute numbers can translate into very high percentage shifts.

Placed in a longer perspective, the evolution of bankruptcies reflects the combined impact of the pandemic and subsequent economic pressures.

Between 2018 and 2019, insolvencies showed no consistent trend. In the first half of 2020, numbers dropped sharply as governments introduced emergency financial support during the onset of the COVID-19 crisis.

This extraordinary intervention kept many firms afloat, delaying bankruptcy declarations that might otherwise have occurred.

From the third quarter of 2020 through 2021, bankruptcies remained at historically low levels.

From the end of 2021, however, insolvency numbers began climbing steadily and reached their highest point in over five years in the third quarter of 2024.

Although there was a brief decline in late 2024 and early 2025, the rise seen in the second quarter this year has pushed bankruptcies to their highest level across the entire period from 2018 to mid-2025.

On the business creation side, every sector except industry reported growth. Transport was the most dynamic, with registrations up 13.1 per cent, while information and communication grew by 8.2 per cent and financial services by 5.2 per cent.

The figures also revealed striking national variations. The Netherlands posted the largest increase in new business registrations, up 57.7 per cent compared with the first quarter.

Spain and Romania also recorded strong rises of 27.6 per cent and 19 per cent respectively.

In contrast, Denmark reported an 18.2 per cent drop, while Cyprus fell by 8.4 per cent and Germany by 6.2 per cent.

Business registrations followed a different path. After falling sharply during the first two quarters of 2020, they rebounded in the second half of that year.

Between 2021 and early 2024, results were uneven, with education, social services and transport performing better than most.

By the final quarter of 2024, new registrations reached their strongest level since 2018 before dipping at the start of 2025.

The latest quarter’s rebound shows that entrepreneurial activity remains resilient, with transport, finance, and information and communication now surpassing pre-pandemic registration levels.

However, trade, construction, industry and hospitality have yet to recover fully to their 2019 benchmarks.

Eurostat stressed that the figures should be interpreted with caution, given the relatively short time series available.

Since the beginning of 2021, EU countries have been legally required to supply quarterly data on business registrations and bankruptcies under the European Business Statistics Regulation.

Before then, submissions were voluntary, limiting the scope for full seasonal adjustments. As more data accumulate, refinements are expected to improve the robustness of trend analysis.

To meet growing demand from analysts, Eurostat has also published annual totals of bankruptcies since 2015, calculated from the sum of quarterly submissions.

These annual figures, last updated in February 2025, offer a longer-term view but are released only at national level, without breakdowns by sector.

The contrasting trends of rising business formation and growing insolvency reflect both optimism and strain across the European economy.

High levels of new registrations signal confidence among entrepreneurs, particularly in sectors linked to technology and services.

Yet the upward trajectory of bankruptcies points to persistent headwinds for established firms grappling with higher borrowing costs, supply-chain pressures and fragile consumer demand.

The divergence across countries underscores the uneven nature of Europe’s recovery.

Economies such as the Netherlands and Spain appear to be benefiting from strong business dynamism, while smaller member states including Latvia and Cyprus face acute insolvency pressures.