Rabat - With the repercussions of the COVID-19 pandemic and the current global crisis still haunting businesses in Morocco, business failures in the country skyrocketed in 2022, rising by 17.4% compared to 2021.

Data from a study by Moroccan firm Inforisk revealed that more than 12,397 businesses failed last year in Morocco, Maghreb Arab Press (MAP) reported.

More than 99% of the failing businesses were Very Small Enterprises (VSE), while small and medium-sized enterprises that defaulted (SMEs) make up 0.7% of the total. Meanwhile, large enterprises that failed last year account for 0.1% of the failing businesses.

The study attributed the surge in business failures to the low use of the companies’ voluntary arrangement, a procedure that enables businesses to settle debts by only paying creditors part of what they owe them.

Moroccan businesses remain “poorly aware” of the available preventive measures they can opt for to protect themselves against bankruptcy, noted the study.

By region, the Moroccan cities of Casablanca, Rabat, and Tangier are home to 41% of the failing businesses, followed by Marrakech (7%), Fez (6%), and Agadir (6%).

Of the failing businesses, 33% operated in the trade sector, while 21% were in the real estate industry, noted the report.

Meanwhile, 15% of the failing business operated in the construction and public works sector, while 8% were in the transportation field.

In its Q1 2023 Insolvency Barometer, American audit firm PwC projected that the impact of the economic crisis will significantly increase the number of failing businesses in 2023 compared to last year.

“With economic headwinds remaining driven by high inflation, energy costs, and interest rates, in our view, there will continue to be significant pressure on the profitability and cash flow of many businesses through the early part of 2023 at least,” said Ken Tyrrell, PwC Ireland business recovery partner.