As many as 100,000 companies which were perfectly healthy in January 2020 are now fighting for survival, according to the chief economist of the employers’ federation FEB.
According to the organisation, the Federation of Belgian Enterprise, the Covid-19 pandemic has taken a toll of Belgian businesses that yet remains invisible. Even those businesses that may appear to be carrying on are, chief executive Pieter Timmermans said, up to their lips in the water.
“Businesses are barely surviving,” he said. “Measures such as temporary unemployment and closure premiums have helped companies to hold on to some reserves. But they were in fact more generous for employees.”
Timmermans was speaking as the end drew in sight of the measures to support businesses hit by the Covid-19 measures. And companies, he claimed, are in many cases down to their last penny despite the aid received from government.
Timmermans cited a report by the National Bank that pointed to a cash drain from Belgian businesses in the period from March to September of €28,2 billion – the difference between income and outgoings.
The difference, for the most part, comes from company reserves. Government assistance came to €7 billion.
In the meantime, the FEB estimates it will take until the middle of 2022 until the economy has recovered to the level of end-2019. “And that’s assuming the health situation improves as the vaccination campaign gets underway, and that we really get out of lockdown mode by the middle of this year,” he said.
The solution is not in borrowing, he said, which only lays up trouble for the future. What is needed is what he called ‘backbone support’ for the country’s businesses.
Chief economist Edward Roosens explained: “Weakened companies mean a higher risk of bankruptcy. We can now say that about one in four, or 100,000 companies that were perfectly healthy on January 1 2020, is in trouble today.”
“Now is the time to do something about it,” Timmermans added. “Otherwise those businesses will collapse, employment will fall and only then will you start to see major consequences. A reinforcement of own resources is necessary.”
One suggestion he offered was a law similar to the law introduced during a debt crisis in 1982, when small savers were encouraged to invest in company shares, with the result that a generation of middle-class people became investors in business, and gained a new insight into the economic affairs of the country.