Belgium will end the year in the top 3 for the number of bankruptcies in the eurozone: this is what Allianz Trade, ” world leader in credit insurance “, declares in its latest report. The flat country, “overtaken” by Austria and the Netherlands, will experience 9,100 bankruptcies this year, an increase of 39% compared to 2021.
The reason, according to Allianz Trade: companies have benefited from coronavirus-related subsidies and payment deferrals, even though they were not in very good health before the pandemic. The insurer also points to the fact that 10 to 15% of Belgian companies are “zombie companies”: their Ebitda (Gross Operating Surplus) is insufficient to pay interest for three consecutive years. ” These disrupt the economic fabric “, explains Johan Geeroms, Director of Risk Underwriting Benelux at Allianz Trade. ” They disrupt the general economy because they do not provide productivity to compensate for what they have ‘bought’ with state aid and are therefore kept artificially alive until they fail. can no longer follow. ”
If these zombie companies don’t go bankrupt en masse, they’re the first to go, ” that’s not a bad thing, by the way. The point is not to ‘reward’ companies with poor management, lack of innovation, digitalization, and who are not looking for new markets. Think of it as a hedge of beech trees that have to be pruned from time to time to remove dry branches to allow healthy branches to flourish. ”
The report adds that deferred tax debt carryovers and rent arrears, permitted during the pandemic, will also “take casualties ” in Belgium this year.
“ A failing public budget ”
Still, according to Allianz Trade, another factor that plunges Belgium into such a situation is a large number of SMEs, which are mainly family businesses. The lack of large proprietary companies, with strong financial buffers, makes SMEs more vulnerable not only to macroeconomic factors (rising energy, transport, personnel costs, etc.) but also to the risk of a payment default.
On this point, the insurer specifies that only 10 to 15% of Belgian companies have credit insurance against payment default. However, in the event of a request for additional financing or a bridging loan, the banks ask for proof of this from the SMEs. ” In principle, 40,000 companies should use it .”
In addition, argues the report, ” the fragility of the Belgian economic fabric is linked to a failing public budget with little fiscal influence “. Furthermore, ” export-oriented countries, such as Belgium and the Netherlands, are also much more sensitive to international developments such as the war in Ukraine. ”
Allianz Trade encourages SMEs, through the voice of Johan Geeroms, to have the courage to ” pass on the inflationary consequences of the global economy, even partially, to the end customer “, without fear of losing market share. “ Diversification of the customer portfolio and business sectors also remains important. It is also essential not to go too far in terms of exports. to fight with others to get it. ”
“ Anyway, ” the report concludes, “ Allianz Trade expects Belgium to decline by +10% to 10,000 bankruptcies expected in 2023, reaching virtually the same level of insolvency as before the pandemic in 2019. ” Globally, bankruptcies will increase by 10% in 2022 and 14% in 2023.
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