June sees a record number of bankruptcies

  • The Graydon Office just published the June bankruptcies numbers.
  • The analysts points out payment behavior and lack of resources.
  • And the law on the continuity of companies as well.

It has become a sad habit that seems to be here to stay. The Belgian company numbers that are published at the beginning of each month by Graydon continue to illustrate the marked trend that began in 2009. The month of June has seen no less than 1,033 enterprises lock their doors. This translates to a 3.41% increase compared to June 2012.

The first six months of 2013 suffered the worst loss ever recorded by Graydon “since the beginning of the century” (sic). These results are monthly records, with the exception of May. As far as the regions are concerned, it indicates a general increase, especially in Brussels-Capital of 33.4%. Flanders is faring slightly better with a slight increase of 4.8%. Lastly, Wallonia saw a 6.1% increase in bankruptcies.

“Following the first effects of the 2008 crisis on the real economy, the number of bankruptcies has continued to increase significantly,” comments Eric Van den Broele, Graydon senior manager.

These past three month, however, reveal a new phenomenon. The second wave of bankruptcies occurring in Flanders among medium and large industries is now creeping to the center and south of the country.

“Until now, the hospitality, retail and small building sectors were in the front lines in Brussels and Wallonia. These were quickly followed by large suppliers, and now it has reached over the entire kingdom and to every level.” Explains Mr. Van den Broele.

He then specifically points out customer “poor payment behaviors”(sic). One out of eight invoices is paid late or not at all. The result is that one of four bankruptcies is due to deadbeats.

Another observation is a lack of resources and reserves. “The companies exhausted by the stability of the costs are directly affected.” To explain this, the researcher explains that companies too frequently invest using borrowed money rather than bolstering their reserves, then investing when the business climate improves.

Graydon also points to SME’s difficulty in reducing costs, whereas large companies have had greater success during the past few months.

The law on the continuity of companies is put in the spotlight

Even worse, Graydon now questions, and not for the first time, the suitability of the law regarding the continuity of companies. According to Eric Van den Broele, this only delays bankruptcies. “We are seeing that most companies, about 70%, which resort to this mechanism end up filing for bankruptcy,” laments the senior manager.

This law lowers the legal limits for companies that find themselves in trouble in order to help them overcome a difficult time.

Graydon’s criticism echoes the one already pronounced by the secretary of state John Crombez who stated last September in the De Tijd news outlet that this law was “a free-for-all for scammers”, and it will be subject to an upcoming reform. We are still waiting.

In the midst of this avalanche of bad news, it should be noted that the national bankruptcy curve should not change radically in the next few months. “We expect a less severe increase but certainly not any kind of drop,” elaborates Mr. Van den Broele.

OLIVIER CROUGHS

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