More than a quarter of Belgian companies in trouble

More than a quarter of Belgian companies in trouble
Employees in the service voucher sector accounted for the largest group of recipients. Credit: Belga/ Dirk Waem

More than a quarter (27%) of companies in Belgium are currently struggling to stay afloat, mainly driven by wage indexation, recent calculations found.

Companies have faced mounting challenges in recent years, starting with the pandemic in 2020, which saw many businesses go bust or heavily rely on financial assistance made available by the government. However, even during the health crisis, the number of companies indicating they were in trouble was lower than today (18% compared to 27% now).

While some 76,000 companies that were doing well before found themselves struggling last year, this figure is now as high as 115,000 as a result of the "wage shocks," estimates by Graydon Creditsafe as reported by L'Echo showed. The effects of the energy crisis are also increasingly being felt.

In Belgium, the wage indexation (sliding wage scale) triggers an automatic rise in wages intended to keep pace with inflation to maintain the purchasing power of the workers. As inflation reached the highest level since 1975, the effects of this are weighing on employers, who already in June this year warned the situation had become untenable.

While welcomed by unions and employees, the system of wage indexation is only implemented in a handful of other EU countries — Cyprus, Luxembourg and Malta — meaning it is fuelling major concerns that economic activity will move to neighbouring countries where the cost of labour is lower.

Sectors affected differently

The share of "healthy companies" has fallen from 47% to 39%, and the need for capital injections has increased by €20 billion.

Three times more companies are affected by salaries than by skyrocketing gas and electricity bills. The effects of the wage indexation are most felt in the service voucher providers (cleaning ladies and household help), where more than half of the companies (56%) are in the red.

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This is followed by the catering and food industry, which was already experiencing budgetary difficulties, and where four out of ten companies now do not have sufficient resources to weather the crisis. Here, the energy crisis is affecting twice as many companies, highlighted by a recent protest by bakers.

Overall, just 9% of companies are in the red as a result of the energy crisis, however, Graydon Creditsafe stressed that the energy shock is only now being fully felt within the business community, as many energy contracts are only now starting to come to an end, meaning the worst may be yet to come.

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