Entrepreneurs anticipate more turnover and less investment in 2021

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Entrepreneurs expect investments in the coming year to be lower than in the current year for the first time since 2013, but a majority anticipate an increase in turnover and staffing levels. However, this optimism is lower than in previous years. Pessimism dominates expectations for the fourth quarter. Nevertheless, business confidence has increased as a result of higher turnover and a more favourable economic climate in the third quarter. This is reported by Statistics Netherlands (CBS), the Dutch Chamber of Commerce (KvK), the Economic Institute for Construction and Housing (EIB), the Dutch Organisation for Small and Medium-Sized Enterprises (MKB-Nederland) and the Dutch Employers’ Organisation (VNO-NCW) on the basis of the Netherlands Business Survey (COEN). The data for this survey were collected at the beginning of October 2020, largely prior to the tightened COVID-19 measures.

Each year, non-financial enterprises with at least 5 employed persons report their expectations for the coming year in the Netherlands Business Survey. Looking ahead to 2021, entrepreneurs anticipate an improvement compared to 2020 for three out of four year indicators, but these expectations are less positive than one year previously.

On balance, nearly 18 percent of entrepreneurs expect to generate higher turnover next year compared to 2020. In terms of turnover realised abroad, the share is almost 13 percent. Entrepreneurs anticipating an increase in staffing levels for 2021 slightly outnumber those expecting a decrease, but optimism is lower than in the previous five years. 68 percent of entrepreneurs expect staff numbers to remain the same next year. For the first time since 2013, entrepreneurs have a negative outlook on investments, on balance. Over 20 percent expect a decrease in investments compared to 2020, while 15 percent anticipate an increase.

Business confidence in Q4 negative

In Q2 2020, business confidence reached the lowest level since measurements began at the end of 2008. Prior to the partial lockdown at the beginning of October and after an increase in the third quarter, confidence continued to rebound to -4.0 in Q4. Approximately two-thirds of the sentiment indicator consist of opinions on the results over Q3 relative to Q2. The increase in business confidence in the fourth quarter is caused by higher turnover and a more favourable economic climate in the third quarter. On the other hand, expectations for the current quarter expressed by entrepreneurs at the beginning of October are more pessimistic than in the previous quarter. In the most pessimistic sector, accommodation and food services, on balance 61 percent of the entrepreneurs expect turnover to be lower than in Q3.

Entrepreneurs focus on working from home and digitisation

This quarter, the Netherlands Business Survey contained an additional question about what structural changes entrepreneurs expect to implement in their business operations, due to the coronavirus crisis, the climate crisis or the nitrogen crisis for example. According to 30 percent of the entrepreneurs, the most important structural changes are that more people will be working from home and that entrepreneurs will work together more online. Sixteen percent of the entrepreneurs cite more investment in digitisation as the main spearhead.

More than 15 percent of businesses mention sustainability as the most important change; in agriculture, forestry and fishing, this share is almost 29 percent. In addition, nearly 14 percent focus on a more flexible workforce; this is nearly 40 percent among entrepreneurs in accommodation and food services. Over 13 percent of entrepreneurs put more effort into strengthening equity capital or reducing debt, and more than 9 percent cite employee training and development as the most important structural change.

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