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Will major bankruptcies continue?

by | Aug 23, 2021 | Firm News

There was a great deal of ink spilled on the stock market rallies of last summer. Investments and stock market stability suffered far fewer impacts than many expected. But that has not stopped the tide of bankruptcies from larger businesses. Many wonder if that bankruptcy trend will stop as the pandemic winds down in America. The answer is difficult to predict.

The last year and a half have been exceedingly difficult for certain aspects of the corporate ecosystem to thrive. Much of that struggle can be placed directly at the foot of the coronavirus pandemic. However, the exact way the pandemic has affected businesses has changed.

Which businesses are more likely to face bankruptcy?

At this historic moment of bankruptcy, there is no tried-and-true way to tell which company is most choose bankruptcy to reconsolidate their debt obligations. Conventional wisdom, backed by some evidence, would say that business models reliant on face-to-face sales have struggled the most. These businesses include:

  • Retailers
  • Restaurants
  • Entertainment venues
  • Travel-reliant industries

Indeed, many of the most vulnerable industries to the pandemic were once seen as incredibly stable. People will always need to buy things. People will always need to travel. And when that stream of consumers slowed, so did their business. But as things reopen, there are new classes of companies struggling.

A labor shortage of sorts

Many client-facing industries and other financial white-collar professions now find themselves growing demand, but without workers to meet it. Workplaces that could go completely remote did just that. Now, with offices reopening and loosening restrictions, these same companies find that many of their workers chose to opt-out of returning.

Indeed, four million people quit their jobs in April in response to impending return to the office orders. This leaves companies in a difficult position as they try to meet ever-increasing demands on production.

Future struggles

With current projections and instability, there is no way to know what the bankruptcy trends will look like. No company can stay solvent forever when there is such historic instability. Many may find that bankruptcy is the most attractive step forward to continue their business.

Stakeholders and business leaders would do well to remember as they worry about their company’s future, bankruptcy is not the end. Bankruptcy is the way to a new beginning.