The number of companies going bankrupt in Lithuania is on the rise and is set to increase even further, as the pandemic business support measures expire.
“A restaurant has only a 25% chance of surviving five years after opening,” says Deivydas Praspaliauskas, founder of the Amandus restaurant in Vilnius.
Before the pandemic, a third of all restaurants in Lithuania were classified as at risk of bankruptcy. Currently, this number has increased to half.
According to Praspaliauskas, the restaurants are at risk because the cost of some products has doubled, but the prices of meals for customers cannot be increased that much: “It will be felt very quickly, with more tables remaining empty.”
“In some places, I save money by negotiating with my suppliers. That’s when we start talking about how long we’ve been in partnership and how much we like each other. Then, we balance and compensate for each other,” Praspaliauskas says.
But balancing and compensating is not an option for everyone. Statistics shows that currently, almost twice as many companies are going bankrupt in Lithuania every month compared to 2020-2021.
“Rising electricity, fuel and raw material prices increase the costs for companies and make it more difficult for them to meet their obligations,” explains Aurimas Kacinskas, CEO of Creditinfo Lietuva.
However, the monthly number of bankruptcies is still below pre-pandemic levels. Meanwhile, during the pandemic, the number of bankruptcies was lower thanks to state support.
“I think that the number of bankruptcies will definitely reach the pre-pandemic level this autumn and probably surpass the 2019 level,” says Vidmantas Janulevicius, President of the Lithuanian Confederation of Industrialists.
Pessimism is not only due to the rising cost of supplies. When raw materials are in short supply, competition for them increases, and companies often must pay upfront.
“This means that companies have had to drain a lot of their financial resources and invest in prepayments to make reservations,” Janulevicius says.
Moreover, companies that have deferred their debts to the State Social Insurance Fund (Sodra) during the pandemic must start repaying them again. According to Sodra, more than 4,000 Lithuanian companies are in debt, together owing over a hundred million euros. (LRT/Business World Magazine)