Pandemic long-term outlook: pressure on GDP underlines need to adapt and future-proof business for the shifts ahead

PwC’s Global Restructuring Trends 2020

Wednesday 2 December 2020 - With more than 40 million workers in 37 economies on furlough, businesses are forced to devise clear exit strategies. In the face of continued uncertainty, PwC’s latest Global Restructuring Trends study how governments and businesses in 37 countries (including Belgium) reacted to the economic impact of COVID-19, identifying the main challenges and the government measures introduced. ​


Government support holds back insolvency and restructuring activity, for now

Across 37 economies analysed, more than 40m workers have been on furlough during the COVID-19 pandemic. In Belgium, this represents 22.5% of the workforce (July 2020). To date, the largest element of the increase in unemployment in Belgium has been among temporary and contract workers. Companies have drawn on furlough schemes in an effort to conserve liquidity. As government support measures are phased out, a significant increase in overall unemployment is expected until 2022. It is clear that the focus is now on cost reduction initiatives, having at the outset of the pandemic been upon conserving liquidity.

The insolvency moratorium introduced during the first wave of the COVID-19 lockdown period has held back insolvencies. Insolvencies are expected to further pick up again as of 2021, especially companies belonging to those sectors that were severely affected by COVID-19 and for which recovery will take much longer. However, companies that have had difficulties in adapting their activities to the new conditions in recent months are also at risk of facing difficulties next year. These are mainly companies that already struggled with financial difficulties as early as 2020.

Thomas Deryckere, Director at PwC Belgium comments: “Government intervention has provided a vital lifeline for many businesses, even ones that had previously been strong and well-resourced. ​ Few would doubt that we’re entering a make or break period, with businesses facing hard choices ahead. In this context, businesses need to act now to get themselves on the front foot. They need to understand their options to stabilise their business in the short-term, while also helping them gear up for longer term shifts in technology, customer expectations and international trading arrangements.”


Restructuring activity set to pick up again

The report finds that restructuring activity is expected to increase again by medio 2021, which could ​ help to reduce the number of potential insolvencies and increase the likelihood of companies surviving. Undeployed capital in private equity ($2670.8bn) and debt funds is at an all-time high, significantly above the levels available during the global financial crisis, creating a launchpad for a fast acceleration in deals and market recoveries. An increasing number of companies have been able to raise new financing without significantly compromising existing debts, and thereby avoided lengthy restructuring processes

Waiting until government support is withdrawn could significantly reduce the options available. We don’t know how long it will be before pre-pandemic levels of output are restored. To prepare for the coming round of restructuring businesses should focus on repairing their balance sheet and creating the foundation of a healthy medium- to long-term recovery. At the same time, the pandemic looks set to accelerate shifts in the economy in the longer term, as more and more businesses are moving towards digital retail, while the importance of sustainability is steadily increasing. This isn’t just about surviving, but also maintaining control of the business, preparing for the future and ultimately thriving in the long-term”, concludes Thomas Deryckere.


You will find the complete report here.



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