Initially, COVID-19 entailed a decline in business profitability, followed by a decline in solvency, especially among the most affected firms/industries. To support firms affected by the pandemic, it is necessary to establish mechanisms which make it possible to identify firms that have been jeopardised as a result of the COVID-19 crisis, as opposed to those which were already having some prior difficulty. This is no simple differentiation, as the vast majority of firms will be affected by the crisis and will therefore present similar symptoms.

Differentiation of firms according to impact of COVID-19

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Following the factors for differentiating firms developed by Blanchard et al. (2020), in a joint paper with the Basque Finance Institute of the Basque Government, Orkestra has identified four types of firms to classify their performance under COVID-19(1)  and help focus the programmes to be implemented.

• Economically PROFITABLE(2) AND SOLVENT(3).
• Economically PROFITABLE but have become INSOLVENT due to an increase in debt.
• Economically UNPROFITABLE but SOLVENT.
• EEconomically and financially UNPROFITABLE and INSOLVENT.

The goal is to produce a methodology that will make it possible to evaluate the impact of COVID-19 by comparing the initial situation (2017-2019) with subsequent development (2020 and later). Following the aforementioned methodology, we have analysed trends in 18,025 firm

Changes in financial types during COVID-19

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Source: SABI-Informa. Compiled by authors.

Analysis of the performance of the sample of firms highlights the negative impact of COVID-19, especially on profitability and to a lesser extent on solvency. Of the 12,727 firms categorised as profitable and solvent prior to COVID-19, 27% were no longer in this position in 2020. What is more, prior to the pandemic, 12% of firms were classified as having solvency problems, a percentage which has increased to 14% of the firms analysed. Despite this general trend, declining profitability and to a lesser extent solvency, firm performance has varied. And although they are in the minority, some firms have improved their situation compared to prior to the pandemic (2% have become solvent when previously they were not).

Although delinquent payment levels have not increased and bad debts in the system remain below 5%(4), there are studies that point to an uptick in insolvency proceedings in 2022(5). In this context, liquidity policies have given way to policies aimed at improving the solvency of firms, such as novations of existing loans, subordinated loans, and tools for direct shareholding interest by government bodies. With the aim of increasing efficiency, these policies must be supplemented by private action by both shareholders (capital increases) and other finance providers (commitment to maintaining pre-crisis credit lines).


    • (1) Research project: ‘Financiación para la consolidación empresarial en la era post Covid-19’
    • (2) Definition of profitability: for pre-COVID-19, that the company had a positive surplus from its business activity over the last three years. For after COVID-19, that the company had a positive surplus from its
      business activity in 2020.
    • (3) Definition of solvency: that the Net Financial Debt / Assets ratio is below 7.5, following the European Commission definition for firms in crisis.
    • (4) Boletín Estadístico del Banco de España, 2.º semestre de 2021.
    • (5) Insolvency increases expected amid phase-out of fiscal support, Economic Research, Crédito y Caución, October 2021.


Ibon Gil de San Vicente

Ibon Gil de San Vicente

Ibon Gil de San Vicente, Deputy General Director at Orkestra, holds a Degree in Economics from the University of the Basque Country. Following this he continued his studies with a Master's Degree in Business Administration from the University of Kent (UK) and a Master's Degree in Business Innovation from the University of Deusto.

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Juan Pablo Salado

Juan Pablo Salado

Juan Pablo Salado, is an Industrial Engineer with experience in Market Analysis and specialised in Data Engineering. Currently, he supports the research of several projects at Orkestra as a Data Engineer, ensuring the analysis, transformation, integrity, and availability of data.

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