One in four businesses won’t make it out of lockdown without help

One in four businesses won’t make it out of lockdown without help
A deserted Rue Neuve in Brussels under lockdown. © Belga

One in four businesses in Belgium will come out of lockdown only to go bankrupt without additional government help, according to a survey carried out by the consultancy Graydon.

A large number of companies are structurally sound enough to come through relatively unscathed, Graydon said, either because they were strong going in, or because their business was not badly affected, or both.

Others will be safe thanks to the government help made available since the first lockdown measures were introduced in mid-March.

And a large share of companies will barely scrape through, doing just enough to survive, and hoping for a rapid return to normal so as to quickly make up for the damage done.

Nevertheless, about one in four will re-open only to close shortly after.

The regions differ slightly in their prospects. For Belgium as a whole, Graydon calculates the number of companies in danger at 25% grave danger and 38% raring to go, with the neutral group in the middle.

Flanders has 24% in danger, and Wallonia on 25%. Brussels, however, has 35% of its companies in immediate danger, with only 28% in the safe group.

Only a small percentage of companies predicted to fail were already in deep trouble before the crisis; the majority were pushed over the edge by the circumstances of the lockdown and its knock-on effects. That was particularly the case for sole traders and associations in the non-profit sector.

The analysis by Graydon suggests that financial support is required to stop a quarter of companies from going under. That can come from three sources: direct government support; increased access to bridging credit from banks and other lenders; and capital injections from shareholders where the company structure allows it.

Graydon’s simulation took account of the situation until 3 May, when some of the lockdown measures will be adapted or abandoned. But the government’s exit strategy comes in various phases yet to be clearly defined. How the following phases will affect the business climate remains to be seen.

Alan Hope

The Brussels Times

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