US corporate bankruptcies hit 14-year high

Today’s agenda: Nato official warns “stupid” investors; Apple plans to expand News app; EIB fears “reputational disaster”; mental health toll on “sandwich carers”; and how much sick pay is too much?

Good morning. US corporate bankruptcies have hit their highest level since the aftermath of the global financial crisis. Here’s what we know.

What the data says: At least 686 US companies filed for bankruptcy in 2024, up about 8 per cent from 2023 and higher than any year since the 828 filings in 2010, according to data from S&P Global Market Intelligence. Out-of-court manoeuvres seeking to stave off bankruptcy also increased last year, outnumbering bankruptcies by about two to one, according to Fitch Ratings. As a result, priority lenders to issuers with at least $100mn of aggregate debt experienced the lowest recovery rates since at least 2016.

What’s causing this? Consumer demand has waned as the Covid-19 pandemic stimulus ebbed, hitting companies that rely on discretionary consumer spending particularly hard. Party supply retailer Party City, which submitted its second bankruptcy filing in late December, said it would shut down its 700 stores nationwide after struggling “in an immensely challenging environment driven by inflationary pressures on costs and consumer spending, among other factors”.

“The persistently elevated cost of goods and services is weighing on consumer demands,” said Gregory Daco, chief economist at EY. The burden is especially heavy for families on the lower end of the income spectrum, “but even in the middle and on the higher end, you’re seeing more caution”. Here’s the full report.

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Here’s what else we’re keeping tabs on today:

Five more top stories

1. A senior Nato official has warned western rating agencies, banks and pension funds are being “stupid” in shunning defence investments. Admiral Rob Bauer, outgoing chair of the alliance’s military committee, told the Financial Times that policies that bar investing in armaments based on environmental, social and governance concerns were obsolete.

2. Exclusive: The European Investment Bank fears a “reputational disaster” if the EU applies new sustainable reporting rules, which this year require a taxonomy classifying green investments, according to leaked internal correspondence. Here’s what the memo reveals about the risk to the multilateral lender’s climate-friendly credentials.

3. A growing number of passengers are bypassing congested hub airports and flying directly, as airlines take advantage of new fuel-efficient jets to redraw their networks. Read more on how advances in aircraft technology have put the “hub and spoke” model under pressure.

4. UK retail sales spending growth was “minimal” and below the rate of inflation in the final three months of 2024, according to figures published by the British Retail Consortium. The data indicates consumers remained cautious in what is typically the busiest period of the year for shops. Read the rest of the analysis here.

5. Apple is stepping up plans to expand its News app, as the US tech group becomes an increasingly powerful force in driving revenues across the publishing industry. The platform, which reaches about 125mn people every month in the US, Canada, UK and Australia, forms part of the iPhone maker’s efforts to tie people to its products. Here’s how it plans to scale up.

The Big Read

Kemi Badenoch, the new leader of Britain’s Conservatives, enters 2025 with what should be a tempting target in her sights: Labour Prime Minister Sir Keir Starmer, whose poll ratings have fallen faster than any premier in recent memory since his election triumph last July. Can she unite the right to defend the Tories’ place as the UK’s main opposition party?

We’re also reading . . . 

Chart of the day

Germany’s sickness absence rates — already high by international standards — appear to have increased sharply, based on data from health insurance companies. The stark contrast with the UK is revealing about sick pay policy trade-offs. Sarah O’Connor asks: how much sick pay is too much?

Take a break from the news

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