As reported by Agoria, the sector federation: since the restart in early May, work within the technology industry has further increased to 86% in June. It is expected to increase further to 90% over the next six months.
A representative sample of 180 technology companies with a total of approximately 65,000 employees was surveyed by telephone between 22 and 25 June. These companies represent 25% of employment and turnover in the Belgian technology industry.
An activity level of 86%
- The activity level for the technological industry as a whole in June was 86%, compared to 75% in early May, following a low of 50% in early April.
- The restart is proceeding as expected. The technology companies have restarted their businesses and adapted their production and services to the public health requirements. Activity remains at a lower than sustainable level due to the general economic crisis and the fact that certain customer sectors have not restarted business.
- For 2020 as a whole, the technology industry expects turnover to decrease by an average of 11%. For 29% of the companies, however, 2020 will have been a year of growth. The coronavirus outbreak has also offered opportunities for growth, mainly to companies in the digital and telecommunications sectors.
- Most technology companies expect business to have returned to a normal rate of 100% by 2021. However, total activity in the sector is only expected to reach 92% by 2021. Larger companies are less optimistic than their medium-sized counterparts.
- In the ICT sector, activity is approaching 90% after dropping to 75% in the previous month. This figure is expected to increase further to 95% in the remainder of 2020 and in 2021. 40% of companies expect 2020 turnover to be higher than in 2019. After all, the coronavirus outbreak has resulted in a boost to digital applications. Alongside the increasing demand for digital solutions, many customers hard hit by the economic crisis are attempting to limit their costs and renegotiate their contracts, sometimes very aggressively, for example the banks. In some cases, companies no longer have a budget for digitisation, e.g. in certain e-health applications. The resulting activity level in ICT is expected to remain below 100%, despite increasing digitisation.
- Companies active in contracting and maintenance (technology and services for the installation, maintenance and exploitation of buildings, infrastructure and industrial systems) are catching up, with a current activity level of 92% compared to 60% in May. Restrictions on site and yard access and employee availability remained in force in early May, with non-essential maintenance work at customer premises still postponed.
Main limitations to expected demand
The main limiting factors to the activity level are as follows:
- Insufficient demand remains the most important limiting factor, mentioned by 69% of the companies. This is expected to improve slightly over the next six months (to 58%), but not enough.
- For more than half of companies (54%), access to customers for acquisition, prospecting, etc. is another major limiting factor. A considerable improvement is also expected here in the coming months.
- Activity at more than a quarter of companies is still limited by issues with the supply of base materials and parts. This explains why more and more companies want to assess and find alternatives for their value chain.
- More than 1 in 5 companies list issues with transport capacity and costs, logistics, employee availability and financial circumstances as limiting factors to their activity. For many companies, remaining operational therefore represents a complex undertaking.
- Social distancing measures and their impact on productivity are still limiting activity in 19.6% of the companies. This is significantly lower than the 26% indicated in Agoria’s previous survey, and is expected to decrease further in the coming months. Less than 10% of the companies are expecting this issue to continue to affect them six months from now. Fears of a second wave do not seem to be impacting these expectations.
More activity, but no full recovery expected in 2021
Current activity level rose sharply in June, but remains far from normal and below the sustainability threshold. The Agoria survey also included questions on expectations for the second half of this year and for 2021. Technological industry companies worldwide are expecting activity to increase to 86% of pre-crisis levels in the third quarter (July-September), and to 90% in the fourth quarter (October-December). Activity in 2021 is expected to increase to 92%, although many companies are finding it difficult to predict the near future.
An employee absence rate of 5.9%
Absenteeism has decreased further from 7.3% to 5.9%. This is partly due to the decrease in absenteeism caused by illness, from 6% to 4.7%.
Furlough falls to 12%, but remains an important support measure
The increase in activity level has resulted in a significant decrease in numbers on the furlough scheme, currently 12%. In view of the fact that activity remains significantly lower than 100%, the furlough scheme is still essential to help with the financial and social impact of the coronavirus outbreak. Especially in aerospace engineering and automotive/mechanical engineering companies, the furlough scheme remains crucial to survive the crisis with no significant reductions in the workforce.
18% of companies forced to reduce their workforce
The persistent economic slowdown caused by the coronavirus outbreak has resulted in a sharp increase in the number of technology companies having to consider laying off permanent employees. In early May, 9% of companies were considering layoffs, which has now doubled to 18%. Naturally, the furlough scheme plays an important role in avoiding redundancies. For many companies, this is a significant factor in the turnover of permanent employees. The current measures end in late August and if these are not replaced by transitional measures, the number of employees laid off will increase. Layoffs from technology companies are expected to increase to 12,000 (3.8% of jobs) by the end of 2020.
A quarter of companies fear financial problems
The coronavirus outbreak and the resulting economic crisis are putting pressure on the finances of technology companies, 13% of which say they are already experiencing acute financial problems. This proportion has fallen slightly since the survey in May, given the restart of business and the resulting increase in cashflow. Governmental financial and fiscal measures have contributed to this, as has furloughing due to force majeure.
25% of the technology companies expects their financial problems to continue into the future. Given the increase in activity in June, this percentage is significantly lower than in May, when 37% of the companies foresaw long-term financial issues. However, 25% remains a high figure, demonstrating that a full recovery to 100% is needed to ensure healthy financial circumstances.
Less than half (47%) of the companies indicate that they intend to apply for the various financial and fiscal support measures announced by the government. Companies’ main reason for not making use of such instruments is that they involve the deferral of payments, which will need to be made up later. Use of the banks’ bridging loans scheme is very limited. In many cases, this instrument appears to be an unsuitable alternative. An extension of bridging loan terms to three years and an improvement in the government guarantee scheme are required for all companies.
The Agoria technology federation has nearly 2000 member companies and is designed for anyone who takes their inspiration from technology. The Belgian technology industry has the highest added value (€30 billion in 2019) and the highest real economic growth (11.5% since 2015) of any sector in the country. More than 310,000 people work in the technology industry. In 2019 the industry turnover was €129 billion, with investments exceeding €4 billion.
Agoria services and principles focus on talent policy, market development, rules and regulations, digitisation, smart ecosystems, infrastructure, the manufacturing industry, the climate, environment and energy. The aim of Agoria’s ‘Be the Change’ initiative is to support the digitisation of the labour market. The federation is the main sponsor of the Agoria Solar Team, 20 Belgian engineering students that aim to become world solar car champion for the second time in Australia in 2021. The organisation has about 200 employees, based in Brussels, Antwerp, Ghent, Liège and Charleroi.