Eight in ten Flemish companies (82%) predict that the ongoing war in Ukraine will negatively impact their economic activities, according to Voka, the Flemish network of enterprises.
Prime Minister Alexander De Croo already said the consequences of the war would be felt in Belgium. A survey conducted by the Voka among more than 400 companies found that the rising prices of energy and raw materials were the most worrying elements.
"After two difficult coronavirus years, our economy is immediately confronted with a new major and global crisis. Shortages of raw materials are threatening everywhere," Hans Maertens, managing director of Voka, said.
He explained that the rising energy prices and record prices for basic raw materials borne by businesses will result in inflation continuing to rise, leading to automatic wage indexations. "This will increasingly put a noose around the necks of our companies," he said.
As a result, one in six companies responded to the survey that they are lowering their recruitment plans for new staff members, while one in four is already reducing their investment plans.
Of the companies that are still looking to recruit, 89% indicate that they are experiencing difficulties in finding suitable personnel. "The tightness of the labour market, therefore, continues unabated."
Disrupted supply and high input costs
Meanwhile, the price hikes are also putting pressure on companies' margins, as many have seen their input costs rise by 22% on average compared to normal levels. Only a small proportion of companies can fully pass on these increased costs, while most have to foot the bill themselves.
Aside from the rising energy and raw material prices, companies also expect their activities to be negatively impacted by supply problems, exacerbated by the war. 80% of companies are experiencing problems with the supply of raw materials, according to Voka.
This is in part due to trade with Russia and Ukraine being severely disrupted due to the ongoing conflict, resulting in payment difficulties, the uncertainty of supplies, the uncertain geopolitical situation and economic sanctions.
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More than half of the companies that export to both countries indicate that their exports have come to a complete standstill, while imports have completely halted in half of the cases.
Voka called for measures to be implemented by the government to maintain the competitiveness of businesses in the region, and said temporary unemployment must be extended until the middle of this year, while the index jump "should no longer be a taboo," referring to the temporary neutralisation of the wage indexation system.
"The effects of the war are also being felt here by every company. However, the worst is yet to come. That is why we are calling on the federal and Flemish governments to set up a task force to continuously monitor the economic consequences of the war and to make proposals to cushion the impact," Maertens concluded.