Several contributory factors have led to the spike in bankruptcies. The residual effects of the pandemic, such as accumulated debts during lockdown periods and the slow return to pre-pandemic business levels, have left many companies vulnerable. Moreover, inflationary pressures have increased the cost of goods, and the central bank’s response of raising interest rates has compounded the financial strain on businesses reliant on loans and credit lines. Another angle to consider is the potential overextension during the optimistic post-pandemic recovery phase. Some businesses may have overestimated the speed of economic normalization and invested accordingly, only to be caught off-guard by the enduring challenges. The Swedish government’s policy response to the pandemic, including furlough schemes and business loans, provided temporary relief but may have also delayed the inevitable for firms that were not viable long-term.

The withdrawal of this support has exposed underlying weaknesses in these businesses. Addressing the crisis requires targeted strategies for each sector. For hotels and restaurants, the focus must be on adapting to the new reality. This could mean diversifying revenue streams, such as developing alternative dining experiences or investing in technology for virtual events and conferences to attract a broader clientele. Government incentives could help these businesses pivot, while targeted marketing might attract domestic travelers to fill the void left by international tourists. Consulting firms need to innovate and possibly specialize in emerging sectors that are likely to thrive despite economic downturns, such as digital transformation, sustainability, and renewable energy. They can also consider more flexible pricing models to retain clients who might otherwise see consultancy as an expendable cost. The construction sector’s recovery can be buoyed by government spending on infrastructure projects, which would stimulate demand. Additionally, a shift towards more sustainable building practices could open up new opportunities within the industry.

Policies that encourage renovation and retrofitting of existing buildings rather than new construction might also provide a steadier stream of work for construction firms. For car dealers, the transition to electric vehicles (EVs) offers a clear direction for growth. With the right support, such as subsidies for EVs or investment in charging infrastructure, car dealers can navigate through the current challenges. They could also explore new business models, such as subscription services or partnerships with mobility service providers. The role of the Swedish government and central bank in responding to this crisis is critical. Measures that provide temporary financial relief to struggling businesses can prevent a cascade of failures. However, such measures must be carefully calibrated to avoid creating zombie companies that will never be viable. The central bank must balance its inflation-targeting mandate with the need to support economic growth. Monetary policy should be complemented by fiscal measures aimed at supporting the hardest-hit sectors and encouraging job creation. Long-term, the government could consider structural reforms to improve the resilience of the Swedish economy, including investment in education and training to ensure the workforce is adaptable to changing industry needs, and policies that promote innovation and entrepreneurship. The alarming rise in bankruptcies in Sweden during February 2024 is a stark reminder of the economy’s fragility in the face of global and domestic challenges.

The affected sectors require both immediate support and long-term strategies to weather the storm. While the government and central bank have pivotal roles to play, businesses must also adapt to survive. The situation may be grim, but with proactive measures and a concerted effort from all stakeholders, Sweden has the potential to overcome this economic setback. Learning from this experience can strengthen the economic fabric of the nation, making it more resilient to future shocks. It is a difficult time for the Swedish economy, but through collaboration and innovation, there is a pathway to recovery and growth. 

By Sara Colin