Belgium Sector report
Sectors @ a glance
Industry performance outlook
Construction/ Const. Materials
The arrows in this overview represent the direction of change in the Atradius outlook for the industry since the previous update. No arrow will appear if there has been no change in our overall outlook.
Remains Fair In 2020 the sector was impacted by the consequences of the first lockdown (e.g. transport and supply chain issues and lack of foreign seasonal workers). The potential for a quick rebound remains, despite adverse price developments, lower sales for export-oriented segments (i.e. pork and potato) and more adverse weather conditions. In 2021 agriculture value added is forecast to increase 1%.
Remains Bleak Automotive value added is estimated to have declined by 23% in 2020, while transport contracted 12%. Last year, the automotive sector suffered from deteriorating sales for passenger cars and commercial vehicles. Meanwhile, transport was impacted by decreased traffic and demand for logistics, due to the coronavirus-related lockdowns and the subdued economic performance. The impacts were also felt in the port-handling businesses and cargo-linked air transport. Due to severe liquidity strains for businesses, payment delays and insolvencies are expected to increase in H1 of 2021.
Remains Good Deteriorating domestic and global demand has had a negative impact on industry performance in 2020, with chemicals value estimated to have decreased by 6.5%. However, the sector has started to rebound, and value added is expected to increase by 2% in 2021. The Belgian chemicals industry shows generally robust business financials and good payment records compared to other industries. The same accounts for pharmaceutical businesses, which will benefit from increasing health expenses and business activities linked to vaccinations.
Remains Poor The Belgian construction sector remains highly fragmented, and consolidation in the market is ongoing. The industry suffers from very low margins due to high competition, especially in the public tendering business. The bargaining power of smaller subcontractors and suppliers has decreased. High labour costs, restricted access to bank loans, high days sales outstanding and rising insolvencies were already issues before the coronavirus pandemic.
Construction value added is estimated to have contracted 10% in 2020. Last year´s performance was affected by the economic slowdown, with more pressure on businesses´ margins, supply chain disruptions and a decrease in efficiency (e.g. social distancing during works and infected workers leading delays to the project deliveries. During the first lockdown in early 2020, construction and construction materials activities declined to a level below 30%, with delays in most projects. However, infrastructure activity continued, and so far, the economic activity has been less severely affected by the second lockdown since November 2020. Sector value added is expected to increase by about 4% in 2021.
Payment delays have increased since H2 of 2020, mainly affecting SMEs and subcontracting businesses. It cannot be ruled out that insolvencies will increase in H1 of 2020. However, there are also opportunities. Due to the pandemic, demand for houses with gardens and/or open space has increased. Additionally, the renovation segment sees increased business opportunities.
Remains Bleak Across all subsectors the credit risk situation of smaller retailers remains tense, as they commonly face difficulties in competing with the market power of large players, which are able to offer a highly diversified product range at lower prices. Strong competition and increasing e-commerce have put downward pressure on prices and upward pressure on services, which has triggered performance issues among larger players as well.
Sales of non-food consumer goods have deteriorated due to the coronavirus impact, and many businesses have faced serious troubles as a result of the lockdowns, the mandatory closures of non-essential activities, sanitary measures and a bad summer sales period. Subdued consumer sentiment and rising unemployment hamper a rebound in the short-term. Retail value added is forecast to rebound just 4% in 2021 after an estimated 17% contraction in 2020.
The amount and frequency of payment delays remains significant, and insolvencies are expected to increase in H1 of 2020, after the expiry of a moratorium for insolvency procedures.
Remains Fair The industry has been impacted by decreasing sales due to the temporary closure of businesses related to the first lockdown and to supply chain disruptions, with value added estimated to have decreased 3% in 2020, after growing 2% in 2019. While spending from businesses and employees on digital goods and services has increased due to the expansion of remote working, subdued consumer senti¬ment and rising unemployment remain downside risks. Currently, ICT value added is forecast to increase by 4% in 2021.
Remains Good The sector remains resilient, but increased financial troubles for businesses and consumers alike have led to more loan defaults for banks and tighter lending conditions. After an estimated 1.5% contraction in 2020, sector value added is forecast to increase by more than 4% in 2021.
Remains Fair In the food retail segment, the expansion of two large Dutch supermarket chains has added more competition with higher pressure on prices, impacting profit margins of Belgian retailers and food producers/processors alike. Pressure on prices and margins persists among all subsectors. Sales are more modest, due to lower demand from the hospitality sector, company cafeterias, schools, tourism, horeca, festivals, sport events and some closures of distribution channels. Additionally, increased sanitary measures have had a negative impact on costs. Food value added is forecast to grow by about 3% in 2021 after an estimated 4% contraction in 2020.
Remains Poor The business outlook remains subdued, as orders on hand and production have decreased due to postponed investments. Domestic and international demand from key buyer sectors like automotive and aeronautics deteriorated in 2020. Engineering value added is forecast to rebound by just 5% in 2021 after an estimated 14% contraction in 2020. Regarding payment delays, we have noticed an increase in the amount thereof over the past couple of months.
Remains Poor Orders and output have been negatively impacted by the downturn of the economy in 2020 (estimated contraction of 7.1%). Demand from key buyer sectors like construction, automotive and machinery remains subdued. Metals value added is forecast to grow by 8% in 2021 after an estimated 15% decrease in 2020. After an increased level of payment delays and non-payments seen in H1 of 2020, the situation stabilised in H2 of 2020, but it is expected to deteriorate again in H1 of 2021.
Remains Fair Paper producers are impacted by less demand due to the economic slump and sanitary measures, continuing to encounter the pressure of the ongoing digitalization. Sector value added is forecast to rebound by 4% in 2021 after decreasing by the same number in 2020.
Remains Bleak Due to the comprehensive lockdowns, additional sanitary measures and lower demand resulting from the coronavirus pandemic, many segments suffer heavily, especially hotels and catering, restaurants, bars, entertainment and cultural events, training and education, hairdressers, travel agencies and tour operators. Service value added is forecast to rebound only 2% in 2021 after an estimated 7% decrease in 2020, and the hotel and catering segment is forecast to grow just 5% after a 15% contraction last year. After already rising in the past couple of months, payment defaults and insolvencies are expected to increase further in H1 of 2021.
Remains Poor Orders and output have been negatively impacted by the downturn of the Belgian economy in 2020 (estimated contraction of 7.1%). Steel producers and traders have suffered from subdued demand from key buyer sectors. Steel value added is estimated to have decreased by 21% in 2020, later growing by about 9% in 2021. After an increased level of payment delays and non-payments seen in H1 of 2020, the situation stabilised in H2 of 2020, but it is expected to deteriorate again in H1 of 2021.
Remains Bleak Producers, wholesalers and retailers already suffered before the coronavirus outbreak from fierce competition, thin margins, lower sales, changes in customer behaviour and increased competition from new online retailers. The performance has further deteriorated due to subdued sales during the lockdowns, and the outlook for 2021 remains subdued. Textiles value added is forecast to increase just 4.5% in 2021 after an estimated 11% contraction in 2020. Wholesalers and retailers of clothing and footwear will be impacted the most, as they will see further rising non-payments and insolvencies in H1 of 2021.