Slowdown in the growth of value added and net operating profits in 2017.
Wide-ranging progress on the employment front, despite the rise in wage costs.

Information garnered from the profit and loss accounts of non-financial corporations reveals that the pace of growth in value added slowed down, dropping from 5.7% in 2016 to 3% in 2017. Large enterprises nevertheless saw their sales growing last year; but the recovery in raw materials prices brought an even higher rise in supply costs, which led to an erosion of value added. The growth in value added generated by SMEs was marginally stronger than that produced by large firms, working out at respectively 3.2 and 3%. As for operating expenses, the year 2017 brought an increase of 3.2%, meaning that the rise in net operating profits of all firms slowed down, from 3.5 to 2.4%. The rise in staff costs (+3.9%) has weighed particularly heavily on overall costs: employment growth – as strong as it had been in 2016 – was accompanied by a resumption of the rise in hourly wage costs during the year under review, as the effects of the wage moderation measures introduced in 2015 and 2016 have gradually faded away. The vast majority of profitability ratios therefore fell back slightly in 2017, for large firms as well as for SMEs. Even though the former have reported generally lower financial profitability levels than the latter in recent years, the return on large companies’ shares is still higher than Belgian government bond yields.

The last few years have been marked by a net rise in median solvency ratios among SMEs, largely associated with the changes made to the tax treatment of liquidation surpluses, which had initially (2013-204) encouraged SMEs to transfer their taxed profits from their reserves to share capital, and later (from 2015 onwards) put them into so-called ‘liquidation reserves’. A reversal of this trend  seems to have begun at the end of 2017: statistics listing changes in capital on the basis of information published in the Belgian Official Gazette (Moniteur belge/Belgisch Staatsblad) reveal that almost 6 000 non-financial corporations reduced their capital through payouts to shareholders in the month of December 2017 alone, while nearly 2 000 others resorted to reductions of share capital under a winding-up process. Analysis of the annual accounts also points up a reduction in the volume of share capital held by SMEs between 2016 and 2017, reflecting the multiple transactions intended to bring a good many firms’ share capital down to levels close to the minimum capital requirements, thus possibly compromising their future financial soundness.

Since 2008, large firms and SMEs alike have registered an almost constant reduction in their financial debt burden, a trend that has coincided with a decrease in the weighted average cost of new loans granted to firms by banks, as well as with a decline in the average yield on corporate bonds issued by non-financial corporations. An examination of the composition of net short-term debt reveals a significant difference between the two groups of companies, even though the level of the globalised ratio is relatively similar on average for the 2003-2017 period (31% in large firms and 29% in SMEs). Outstanding short-term debt is relatively bigger among SMEs than large firms – owing in particular to a higher proportion of other debts –, but the share of cash equivalents is larger for smaller firms, possibly because they do not get new loans as easily. The In-house Credit Assessment System (ICAS) developed by the Bank in fact shows that there are proportionately more SMEs in group of firms with a very high credit risk, even though they are also increasingly present among very low-risk companies.

Information drawn from companies’ social balance sheets reveals that the employment level – which had been barely above 2008 level as recently as 2015 – rose strongly in 2016 and 2017. An analysis of trends over the last ten years highlights a structural change in the economic fabric, to the detriment of industry – badly hit by the 2008 recession – and working in favour of services. By speeding up the process of developing the tertiary sector of the economy that had already been at play for some years now, the economic and financial crisis has led to a sharp decline in blue-collar employment in industry, that has not been fully offset by the increase in the number of blue-collar workers observed in the services branches (and especially business services which has been buoyed up by the service voucher scheme). The development of these business activities has drawn heavily on an increasing number of women taking on jobs, while in industry, the decline in employment has affected men and women in equal proportions. The feminisation of corporate workforces has nevertheless slowed down in recent years, following the recent pick-up in employment among men. The structural changes in the economic base have been accompanied by greater flexibility of the labour force, and not least by the expansion of part-time work. However, the recent recovery of full-time employment could have triggered a fall in the rate of part-time work, something that will need to be confirmed in the next few years. Moreover, after having dropped back in the aftermath of the recession, the share of wage-earners bound to their employer by a temporary contract – excluding temp agency workers, who are not taken into consideration in this analysis –, has since risen considerably. The driving force of the services branches has once again been a determining factor here. And finally, we see that the overall skills level of the labour force has risen, thanks to the continuous growth in the number of workers holding higher education qualifications.