The drop in Belgian companies’ turnover is easing slightly, though the higher risk of bankruptcy suggests permanent damage in some sectors

The drop in turnover as reported by Belgian firms compared to the pre-crisis period has improved for the third week in a row. The Belgian economy seems to be gradually recovering. However, that improvement remains marginal, and the companies surveyed also report an increasing risk of bankruptcy, particularly for certain sectors which were already at high risk. This finding emerges from a survey of corporations and self-employed persons conducted at the request of the Economic Risk Management Group (ERMG). 

For the fifth week in a row, a survey was carried out by a number of federations of enterprises and self-employed persons (BECI, SNI, UNIZO, UWE and VOKA). The aim of this initiative, which is being coordinated by the NBB and the FEB/VBO, is to assess, week by week, the impact of the coronavirus crisis on economic activity in Belgium and on Belgian companies’ financial health and decision-making. In all, 4 208 enterprises and self-employed people replied to this week's survey[1].

Table 1: Impact of the coronavirus crisis on company turnover1

(in %, weighted average based on turnover and aggregated by industry)

 

27 March- 2 April

3-9 April

10-16 April

17-23 April

24-30 April

Flemish Region

-34

-38

-35

-34

-32

Brussels-Capital Region

-30

-32

-28

-31

-28

Walloon Region

-34

-38

-36

-34

-32

Belgium

-33

-37

-34

-33

-31

Sources: BECI, Boerenbond, FEB/VBO, SNI/NSZ, UNIZO, UWE, VOKA, NBB.

1 Representation of the various industries in the sample varies between regions. For the purposes of this calculation, it is assumed that the impact of the crisis by industry does not vary depending on the region. Please also note that figures may differ slightly from previous publication figures due to the inclusion of data obtained afterwards and because the data analysis is continuously refined.

 

The drop in turnover is easing slightly but remains substantial

The companies surveyed continue to report a significant drop in sales compared to the pre-crisis period. Taking into account the size of the firms and the weight of the sectors in Belgian value added, the average decline in turnover as indicated by the firms surveyed comes to 31 %, a result that is only slightly better than that observed in the previous survey.

Although the week-to-week change remains limited, this is the smallest decline reported by the firms in the sample since the survey began - i.e. at the end of March - and the third consecutive weekly improvement. The Belgian economy seems to be gradually recovering, although the decline in turnover remains particularly large. An improvement, albeit relatively small, is evident in certain sectors, such as catering and accommodation, where an 84 % decrease is reported by the companies surveyed, which remains significant and worrying. The arts, entertainment and recreation sector is not seeing any improvement and, as in the last two surveys, a drop of 88 % is reported by the businesses surveyed.

The reason most often cited by the companies surveyed as the reason for this decline is weak demand (47 %), and this is the case in the majority of sectors surveyed. As for the other reasons reported, they are largely specific to the company's branch of activity. The formal ban on certain activities is cited above all in the events sector (91 % of the companies surveyed), the catering and accommodation sector (79 %), and the non-food retail sales sector (71 %). The difficulty in applying social distancing rules is impacting first and foremost the construction sector. Staff shortages and supply problems are generally less frequently cited. Supply problems are particularly acute in the construction sector and in the manufacturing industry.

 

[1]  Participation in the survey by some federations whose members operate in a specific sector of activity may lead to sampling errors. For instance, companies from one by branch of activity could be strongly represented in our sample while they are less well represented in the economy as a whole. The sample by branch of activity is therefore stratified depending on the weight in value added in Belgium.

ERMG1

Firms report fewer liquidity problems but a higher risk of bankruptcy

The results of the survey as regards liquidity problems are in line with those on turnover and are also improving, while remaining comparable to those observed in previous weeks. In particular, 34 % of CEOs who responded said they were experiencing liquidity problems, compared with 38 % on average over the previous weeks. Although there has been a slight improvement, a third of the companies surveyed still believe that they only have sufficient liquidity to last three months at the most.

However, the risk of bankruptcy as indicated by the companies surveyed was up slightly this week. The proportion of firms reporting bankruptcy as "likely" or "very likely" has risen to 9 %, compared to 7 % on average over the previous four weeks. The increase in the perceived risk of bankruptcy is observed in many sectors, inter alia the catering and accommodation and arts, entertainment and recreation sectors. The latter sector even accounts for 30 % of responses indicating likely or very likely bankruptcy. The higher risk of bankruptcy is indicative of the danger that the coronavirus crisis could cause permanent damage to the Belgian economic fabric and is likely to weaken the strength of the recovery.

ERMG2

Businesses also continue to point to a very high level of concern. The average indicator on a scale of 1 (a little concerned) to 10 (very concerned) remains virtually unchanged at a level of around 7. As a result, investments are still being postponed on a massive scale. This is particularly the case in the catering and accommodation sector and the arts, entertainment and recreation sector, where respectively only 7 % and 1 % of the companies surveyed have maintained their original investment plans.