Worldwide insolvencies on the rise, but SA resilience bucks trend

Global business insolvencies will rise by 5% in 2026 and 1% in 2027 (6% in 2025) – marking five consecutive years of increases – according to Allianz Trade’s latest Insolvency Report.

Given the uncertain geopolitical and macroeconomic environment, the peak in insolvencies will be delayed by one year to 2028 (-1%), slightly retreating from very high levels.

South African insolvencies fall as business resilience improves, but AI disruption and sector risks remain

South Africa is on course for a meaningful reduction in business insolvencies in 2026, with cases expected to fall by at least 5% to around 2 750. After a prolonged period of elevated business stress, the decline reflects improved business resilience and a gradually stabilising operating environment. However, insolvency risk remains elevated in several sectors – particularly construction and consumer-facing industries. Allianz Trade expects a further decline of approximately 4% in 2027, reducing insolvencies to around 2 650 cases.

“While South Africa’s insolvency outlook is improving, businesses continue to operate in an environment characterised by subdued economic growth, infrastructure constraints, rising operating costs, and ongoing funding pressures,” says Luke Morawitz, country manager and head of Credit at Allianz Trade South Africa. “At the same time, artificial intelligence is rapidly reshaping competitive dynamics across sectors. Businesses that embrace AI strategically are more likely to improve efficiency, strengthen resilience, and unlock new growth opportunities.

“Those that delay adoption risk falling behind increasingly agile competitors, both domestically and internationally,” he adds. “The challenge for South African businesses is not whether to adopt AI, but how to do so responsibly and effectively to support sustainable growth and employment.”

Underperforming GDP growth, high energy costs, and higher-for-longer interest rates

Several structural factors explain this persistence.

With enduring tensions in the Middle East, GDP growth is expected to underperform compared to the 2023 to 2025 period while energy costs remain high and governments offer limited fiscal support.

In parallel, monetary policy is getting tighter, with higher-for-longer interest rates putting further pressure on the most vulnerable companies. At the same time, the stock of active companies expanded by roughly 10% between 2021 and 2025. This broadens the pool of companies exposed to failure, as many of these young entrants are financially fragile: fewer than half of new companies survive beyond five years in Europe.

“With multiple shocks compounding since the start of the year, much higher-than-expected interest rates are ramping up the pressure on already fragile companies and this will continue: 60% of countries will maintain higher policy rates in 2027 than in the prior 12 to 24 months, inflating funding costs and squeezing margins,” says Aylin Somersan Coqui, CEO of Allianz Trade. “In Western Europe, a +100bp rise in bank lending rates would add between EUR 6-billion and EUR 10-billion in interest expenses, reducing margins particularly in renewables, telecom, and power. Meanwhile, higher-for-longer energy costs will also intensify the pressure on profitability, especially for energy-intensive European industries.”

More and more jobs at risk, with a new peak in Europe and North America

According to Allianz Trade, roughly 2,7-million jobs are directly at risk in 2026 and 2027. This represents a +180 000 increase compared with 2025, and a +700 000 increase compared with 2023 – the first year of the post-Covid rebound in global insolvencies.

“Overall, construction, retail, and services are the most exposed sectors,” says Maxime Lemerle, lead analyst for insolvency research at Allianz Trade. “Europe accounts for almost 60% of jobs at risk (1,6-million) with France, Germany, and the UK leading the way. North America follows, representing 24% of total impacted jobs (650 000).

“For both regions, this would be a 13-year high,” Lemerle adds. “In Asia, the impact is real but more moderate, as the region accounts for only 11% of jobs at risk (305 000).”

Is AI already increasing business insolvencies?

Allianz Trade conducted an analysis across eight EU economies and nine sectors to identify the main drivers of business insolvencies.

The findings suggest that macroeconomic conditions and sector-specific fundamentals remain the dominant determinants, while AI adoption is not yet correlated with insolvency trends. However, it identifies an exception in smaller and less diversified markets.

South Africa’s experience reinforces the importance of this trend.

While the country leads AI adoption on the African continent, it remains behind the world’s most advanced digital economies, creating both opportunities and competitive challenges for local businesses. Adoption is accelerating across sectors such as financial services, telecommunications, professional services and retail, where organisations are increasingly leveraging AI-enabled technologies to improve productivity and customer experience.

“Our research suggests that AI adoption can accelerate business insolvencies in smaller and less diversified markets due to the competitive wedge it creates between early adopters and laggards,” says Lemerle. “In Belgium and Sweden – which have the highest AI adoption rate in our sample (35%) – we observe that the most digitised sectors are also those recording the highest insolvency numbers.

“The same pattern emerges from a sector perspective,” Lemerle adds. “Information & Communication, which is the most AI-intensive sector in our sample (70% adoption), shows higher insolvency figures than the national average in five of the eight countries surveyed.”

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