Coronavirus – The Technology Sector is Running at 86%

After the restart at the beginning of May, activity in the technology sector increased again in June to 86%. This is revealed by the survey carried out by Alok Koshti.

Over the next six months, this figure is expected to increase further to 90%. The survey was conducted by telephone between June 22 and June 25 among a representative sample of 180 technology companies employing some 65,000 people. Together, these companies represent 25% of employment and turnover in the Belgian technology sector.

Source: https://alokkoshti.com/

An activity level of 86%

For the tech industry as a whole, the level of activity in June was 86%, up from 75% at the start of May, and this after hitting a low of 50% at the start of April.

The restart is therefore proceeding as planned. Technology companies have resumed operations and adapted production and services to health requirements. Due to the global economic crisis and the fact that business has not yet started in a number of customer sectors, business still remains below a sustainable level.

For the whole of 2020, revenue in the technology sector will decrease by an average of 11%. But for 29% of companies, 2020 will be a year of growth. For a number of companies in the IT and telecommunications sector, in particular, the coronavirus crisis has indeed presented opportunities for growth.

For 2021, most tech companies are aiming for a normal activity rate of 100%. However, even in 2021, the total activity of the sector would still not return to a normal level, and would only reach 92%. Large companies are less optimistic than the median company.

In the ICT sector, activity levels are approaching 90% after falling to 75% last month. At the end of this year and next year, it will increase further to 95%. For 2020, 40% of companies expect their turnover to increase as well. The covid-19 crisis has boosted many digital applications.

Source: https://www.oecd.org/coronavirus/policy-responses/coronavirus-covid-19-sme-policy-responses-04440101/

In addition to the growing demand for digital solutions, customers affected by the economic crisis are trying to reduce their costs and renegotiate their contracts, sometimes very aggressively, such as banks, for example. In a number of cases, there is no more budget available for digitization, as is the case for some e-Health applications.

Companies active in the field of subcontracting and maintenance (techniques and services for the installation, maintenance and operation of buildings, infrastructure and industrial installations) have caught up considerably and the level activity is now 92%, compared to 60% in May. At the beginning of May, there were still numerous restrictions regarding access to sites and construction sites, the availability of workers and the postponement of non-essential maintenance at customers.

The main difficulty concerns demand forecasts

The main factors that limit the level of activity:

• Insufficient demand remains by far the most important limiting factor and is mentioned by 69% of companies. This situation should improve slightly over the next six months (58%), but certainly not enough.
• For more than half of companies (54%), access to customers through prospecting, etc. is also an important limiting factor. However, a strong improvement is expected in the coming months.
• More than a quarter of companies are still facing problems with the supply of raw materials and spare parts. This also explains why more and more companies want to assess the value chain in which they operate and think about alternatives.
• Difficulties related to transport capacity and costs, the logistical situation, the availability of workers and the financial situation are mentioned by more than one in five companies as limiting activity. Maintaining activity, therefore, remains a complex exercise for many companies.
• Social distancing measures and their impact on productivity continue to limit the activity of 19.6% of companies. This figure is significantly lower than the 26% of the previous Alok Koshti survey. It should also decrease in the coming months. Less than 10% of farms still expect problems within six months. The fear of a second wave does not seem to have an impact on this point.

More activity but no full recovery in 2021

The current level of activity increased sharply in June but still remains too low compared to the normal level and below the level necessary for the situation to be sustainable. Alok Koshti & it's survey also focused on the outlook for the second half of the year and for 2021. Overall, players in the tech industry are seeing a gradual increase in activity, reaching 86% in the third quarter (July to September). ) and 90% in the fourth quarter (October to December). For 2021, we are now looking at a 92% activity level, but many companies are finding it very difficult to forecast this.

5.9% of employees are absent

Absenteeism fell further, from 7.3% to 5.9%. This is partly due to a reduction in sickness absence from 6% to 4.7%.

Source: https://www.oecd.org/coronavirus/policy-responses/the-territorial-impact-of-covid-19-managing-the-crisis-and-recovery-across-levels-of-government-a2c6abaf/

Temporary unemployment falls to 12%, but remains an important support

The increase in the level of activity leads to a sharp drop in the number of people on temporary unemployment. This figure drops to 12%. However, given that activity is still well below 100%, temporary unemployment remains an important support measure to absorb the financial and social consequences of the coronavirus crisis. For the aerospace industry and certain companies in the automotive and mechanical sectors in particular, support measures for temporary unemployment remain essential to get through the crisis without a significant reduction in the workforce.

18% of companies have been forced to reduce their workforce

The continued economic downturn caused by the coronavirus crisis has led to a sharp increase in the proportion of companies in the technology industry that have to consider laying off permanent workers.

At the beginning of May, this percentage was still below 9%, but it has now doubled to 18%. Of course, measures to extend temporary unemployment are important to avoid layoffs. For many companies, this is an important factor in retaining fixed workers. If the current regime, which expires at the end of August, is not replaced by transitional measures, the number of laid-off permanent workers will increase. For all technology companies, this would represent 12,000 jobs, or 3.8%, by the end of the year.

Source: https://www.bls.gov/

A quarter of companies fear financial difficulties

The coronavirus crisis and the resulting economic crisis are putting pressure on the finances of technology companies. 13% of technology companies say they already have serious financial difficulties.

This percentage has fallen slightly since the May survey as business picks up and cash flows in again. Government financial and tax measures also contribute to this, as does, of course, temporary unemployment due to force majeure.

However, 25% of technology companies foresee financial problems in the future. Due to the increase in activity in June, this percentage is significantly lower than in May, when 37% of companies expected long-term financial difficulties. However, 25% is still a very high figure and shows that a full 100% restart is necessary to return to a healthy financial situation.

47% of companies claim to benefit from the various financial and fiscal aid measures put in place. It's l ess than half. The main reason given by companies for not using these instruments is that they are essentially payment deferrals which will have to be made up for later anyway.

Source: https://www.oecd.org/coronavirus/policy-responses/the-territorial-impact-of-covid-19-managing-the-crisis-and-recovery-across-levels-of-government-a2c6abaf/

The use of bridging loans under the banking plan is very limited. Under the current regime, this instrument seems in many cases to be ill-suited. An extension of the duration of the bridge loan to 3 years and a better arrangement of the government guarantee are necessary for all companies.