ING economists express this expectation in a new estimate. For 2021, the ING Economic Bureau expects 1.5 to 2.5 percent of Dutch companies to go bankrupt. That amounts to 6,500 to 10,000 bankruptcies.
It is expected that the majority of these will probably not fall in sectors severely affected by corona, such as the catering industry and the non-food retail trade. There are two reasons for this from economists.
Order in an orderly manner
For example, if economic growth picks up, catering companies will soon have more money in cash. They often get paid directly by their customers, while they can pay their suppliers with some delay.
In addition, catering businesses generally have little expensive machines or other very valuable items. This makes bankruptcy less attractive to creditors: there is little to be done. Just like the non-food retail trade, the catering industry can relatively easily shut down the company itself.
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Capital intensive sectors
That does not mean that it is hallelujah for the catering industry, because ING also expects an increase in those voluntary terminations. “But there is no such specific estimate for this, because there may be several reasons for this,” says economist Katinka Jongkind of the bank.
“Retirement, for example, often also involves business termination. You also see year-on-year that those figures can fluctuate enormously, while bankruptcies are really related to economic contraction and growth.”
Which companies will go bankrupt? “The more capital-intensive sectors, such as in industry,” says Jongkind. “There is still something to be gained for creditors.” In these sectors, purchasing costs rise quickly when the economy picks up again, while turnover often comes in months later.
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Financial support
So not every company and every sector is equally susceptible to bankruptcy. ING also identifies two other reasons that are limiting the increase in the number of bankruptcies of Dutch companies.
One is the financial support that the government provides to the business community, precisely to prevent companies from going bankrupt. In particular, the catering and business services can make use of this.
Flexibilization
The other reason is the increased flexibility of companies, which allows them to scale up and down faster. Wholesale, construction and retail in particular are flexible when it comes to limiting purchasing costs.
The catering and business services often have a relatively large flexible shell of personnel. By reducing the number of employees, bankruptcies can be prevented. Although this is at the expense of rising unemployment, ING signals.
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