The year 2020 saw business stunted around the world due to Covid-19. Thanks to the measures of the government, most enterprises in Hungary have been able to continue their operations so far. However, the credit moratorium will most likely end in 2021, meaning that a sudden increase in company terminations cannot be ruled out. This blog post summarizes the company registration trends of 2020 and makes predictions for 2021 as well.
New company registration
One would assume that fewer enterprises are created in turbulent times, but the equation is not that simple: based on the number company formations, 2020 would seem a strong year. All in all, 28,665 new businesses were registered in Hungary, putting 2020 on par with the very high figures of 2019. However, if you look at each month separately, you will find significant fluctuation. Hungary went into lockdown at the end of March; April witnessed a 30-year low with just over 1400 new companies, while December saw a 6-year high with more than 3000 company registrations. Interestingly, that record was also caused by the pandemic, because many people who had lost their jobs due to Covid were forced to become entrepreneurs to find work elsewhere.
Liquidation and forced strike-off
Last year started with a high number of company terminations, which then decreased considerably and reached a 10-year low in December. This is all thanks to the government’s efforts to help businesses in trouble, such as effectively pausing forced strike-offs, which reached an all-time low in 2020. The credit moratorium also helped many enterprises, as it allowed them to put off their obligation to repay their loans (both the capital and the interest). In total, nearly 30,000 companies were deleted last year, which would be considered average in pre-Covid times, but about 12,000 of these were liquidated by the owners. That is an unusually high figure, which shows that even with the relief measures, certain businesses (especially restaurants) were hit hard by the pandemic.
Predictions for this year
Given that the number of company registrations and terminations was nearly identical, the number of businesses in Hungary stagnated throughout 2020. However, owner-initiated liquidations reached a 10-year high, which is an alarming sign. Furthermore, the credit moratorium ends on 30 June 2021 and the pause on forced strike-offs will also be lifted. A wave of company terminations is expected later this year. Provided that the upward trend of company formations continues, the number of active enterprises will remain stable, but possibly at the cost of higher fluctuation, which may have negative consequences for business owners in the long run. Based on our 15+ years of experience in supporting enterprises in Hungary and following company operation trends, it would seem reasonable to assume that higher fluctuation will disrupt established supply chains and supply-demand dynamics.
Contact us for help with company formation!
Our team completed 82 company registrations in 2020, supporting foreign business owners in Hungary even in turbulent times. With 15+ years of experience, Helpers is a safe bet when starting your enterprise in Hungary.
If you would like to learn more, contact our English-speaking company formation experts. You can learn more about our services here. You can ask for a consultation by calling our office on +36 1 317 8570, by e-mailing info@helpers.hu or by filling in our contact form.