Belgian growth companies keep the local economy afloat
While we are bombarded with negative news on banks, insurers and tech producers, Belgian growth companies appear to be keeping the Belgian economy afloat. They may account for a fraction of all Belgian companies with a minimum of ten employees, but they generate exponential growth in employment and productivity. This has emerged from the ‘Belgian High-Growth Monitor’, a study conducted by Professor Hans Crijns and researcher Yannick Dillen within the Impulse Centre ‘Growth Management for Medium-sized Enterprises’ (iGMO) at Vlerick Business School and in cooperation with EY. As part of their research, they analysed the evolution and characteristics of growth companies in Belgium.
Growth companies are businesses with a minimum of ten employees whose workforce or added value increased by 20% or more annually within a three-year timeframe. These organisations have a major impact not only on job creation and employment, but also on GDP growth.
If we look at the employment rate for the period 2012-2015, exactly 3% of all Belgian companies with ten employees or more (which deposited their financial statements for the year 2015) match the profile of a growth company. That equals 674 out of 22,475 companies. Together, these companies created 45,278 jobs, while the total job creation in all Belgian companies with ten employees or more combined stood at a mere 13,256.
“Currently, quite a few companies are launching staff cuts and downsizing, but fortunately, in parallel there are growth companies that create jobs. They are the driving force behind the Belgian economy”, Professor Hans Crijns explains.
When we look at the economic added value for the period 2012-2015, twice as many companies (6.27% or 1,410) can be considered growth companies.
“These growth companies are the drivers of Belgian GDP growth, since they account for the vast majority of the added-value creation. That being said, some caution is warranted, since the creation of added value is actually strongly concentrated in a mere 6% of companies, which results in the economy relying heavily on a fairly small group of growth companies. On the other hand, a financial indicator like added value is clearly a more volatile growth criterion than employment. This may explain why it is relatively easier to grow faster in terms of added value than in terms of workforce”, says Yannick Dillen, Postdoctoral Researcher at Vlerick Business School.
"I notice an even more distinct growth with regard to the finalists of Entrepreneur of the Year 2016, the competition for fast growing companies in Belgium. Yesterday Daoust and Vyncke won that competition for the Walloon and Flemish part of Belgium respectively. The 8 fast growing companies – Boma International, Daoust, Gemaco Group, LVD, Pranarôm-HerbalGem, Procoplast, Ronveaux and Vyncke – have grown 106% in turnover, 83% in added value and 52% in personnel during the period 2010-2015. With an average turnover and added value of respectively € 103 million and € 43 million in 2015 they show that size is not by definition an impediment to growth. These growth champions excel in entrepreneurship, internationalisation and innovation, and they have a sound governance directing them towards sustainable growth”, says Marc Cosaert, Partner M&A Advisory at EY.
Who are they?
Growth companies are mainly knowledge-driven service providers (focusing on IT, communication, science, technology and administration). They are underrepresented in traditional sectors, such as production, construction, retail and transport.
Geographically speaking, the provinces of Antwerp and Walloon Brabant head the list. West Flanders, Liège and Hainaut, on the other hand, have the least growth companies compared to the total number of Belgian businesses. The Brussels-Capital region is the uncontested leader, with 11.15% of all Belgian companies with ten employees or more and an astonishing 16.47% of growth companies based on employment. As for growth companies based on added value, 14.18% are headquartered in the Brussels-Capital region.
Profitability is also guaranteed in this field. In 2012, virtually all fast-growing companies recorded lower profits than the other Belgian companies. Fast-forward three years and growth companies based on employment had doubled their profitability, and growth companies focusing on added value had even increased it almost eightfold on average, by 7.6 to be precise.
Lastly, it is a misconception that all growth companies are young companies. In fact, they were founded 20 years ago on average and they have been working on their success for the past two decades.