Small businesses across the U.S. are experiencing a surge in bankruptcies, surpassing levels not seen since 2020, and conditions could become worse as the ripple effects from the recent banking crises begin to manifest, The Epoch Times reported. The note from the UBS Evidence Lab shows that private bankruptcy filings in 2023 have exceeded the highest point recorded during the early stages of the COVID-19 pandemic by a considerable amount. The four-week moving average for private filings in late February was 73 percent higher than in June 2020. “[We] believe one of the more underappreciated signs of distress in U.S. corporate credit is already emanating from the small- and mid-size enterprises sector,” Matthew Mish, head of credit strategy at UBS, wrote. “[The] smallest of firms [are] facing the most severe pressure from rising rates, persistent inflation and slowing growth.” The Federal Reserve’s monetary tightening to combat inflationary pressures has been largely behind the uptick in bankruptcies. UBS indicated that the fear of a credit crunch has further worsened the rise in defaults. As of February 2023, the monthly bankruptcy filings exceeded 31,000, an 18 percent rise from the 25,564 bankruptcy filings reported in February 2022. The increase in chapter 11 bankruptcies rose by 83 percent over the same period, with 373 total filings in February. The White House has downplayed the current economic challenges and their effect on small businesses. Last week, President Joe Biden cited higher rates of new business formation over the past three years — without acknowledging the issues entrepreneurs face. (Subscription required to view article.)
