The global economy is slowing down to its lowest level since 2009, growth in Europe is at its slowest pace in six years and the number of bankruptcies in Belgium is rising again. All this in a context of trade tensions and a sharp decline of global manufacturing. Here are the main ingredients of a cold economic winter. You should monitor this situation closely, knowing that it can cause serious cash flow problems for your customers and, consequently, for your own company. It is therefore essential to protect yourself and to watch your partners.
Prevention is better than cure. Ensure that your business has the necessary means to grow. Protect yourself and your commercial partners against bankruptcies and defaulters with a strong and secure payment policy by leveraging the assets of Euler Hermes Trade Credit Insurance.
Economic conditions deteriorated throughout 2019 and the situation is unlikely to improve in the coming months. Political uncertainties in many parts of the world and the US-China trade dispute have led to a sustained drop in demand levels and pushed company inventories to unusually high levels. Hence, we expect Eurozone GDP growth to reach 1% in 2020 from 1.1% in 2019, narrowly avoiding a recession scenario.
The Belgian open economy is strongly linked to developments in our main export markets, namely Germany, the Netherlands, France and the United Kingdom. The German economy has gone from being a European growth-motor to a laggard in a few years, which has direct consequences for Belgian companies. In addition to the uncertainties associated with Brexit – again postponed and with potentially very harmful effects.
Q3: six large Belgian companies facing bankruptcy
All these developments make markets extremely volatile, with a direct consequence of increasing bankruptcies. All types of companies, large and small, and all sectors are facing this risk, the recent bankruptcy of tourism giant Thomas Cook speaks volumes. In Belgium alone, in the third quarter of 2019, five other companies with a turnover of more than 50 million euros had to close their doors: Abattoir et Marche de Bastogne, IT Pro, Corelio Printing, Pluimveeslachterij Lammens and Carimat Matériaux, alongside Thomas Cook Belgium.
The total number of bankruptcies in Belgium is also rising since the beginning of 2019 (8,828 bankruptcies from January to October). In addition, the situation is not likely to improve in the coming months: our global insolvency index forecasts an increase of 8% in the number of forced closures worldwide and 3% at the European level between 2019 and 2020.
“In the third quarter of 2019, five companies with a turnover of more than 50 million euros had to close their doors in Belgium, alongside Thomas Cook Belgium.”
Beware of late payments and unpaid invoices
A precursor to insolvency: credit problems and payment defaults. Delays and unpaid invoices are the main cause of one in four bankruptcies in Belgium. Even if your company is doing well: a problem with one of your customers or suppliers can quickly cause you to falter. Since the beginning of 2019, at Euler Hermes BeLux, we have seen a significant increase in Trade Credit Insurance claims – both in number and intensity, especially on export markets. Demonstration – if still necessary – that economic conditions are deteriorating.
In this context, it is essential to protect yourself. Trade Credit Insurance is more than ever the best way to secure your company's cash flow and sustainability. Our experts keep an eye on macroeconomic developments and the financial situation of your clients. This way, you can focus on the essentials: succeed safely. Since the beginning of the year, our covered exposures have increased by 6% – all sectors combined. Euler Hermes remains a reliable partner at your side (member of the Allianz Group and rated AA by Standard & Poor's) – even in difficult times.