EUROCERTIF
Construction is one of the engines of the Belgian economy, but it is also, year after year, one of the sectors hardest hit by bankruptcies. Hundreds of construction companies cease trading every year, sometimes leaving behind stalled projects, lost deposits and helpless clients.
Understanding why this sector is so exposed helps you protect yourself better — whether you are a contractor keen to make your business sustainable, or a client about to entrust a project.
A structurally exposed sector
Construction combines several risk factors rarely found together elsewhere. Projects stretch over time, tie up cash for weeks or months, and depend on a long chain of players: suppliers, subcontractors, engineering firms. A single failing link can jam the whole machine.
On top of that comes strong cyclicality: construction is highly sensitive to the economic climate, interest rates and household confidence. When the property market slows, order books empty quickly.
The most common causes
Behind every bankruptcy there is often a combination of factors rather than a single cause.
- Thin margins: competition pushes prices down and leaves little buffer to absorb the unexpected.
- Late payments: a client who pays late, or not at all, can be enough to throw the entire cash flow off balance.
- Tight cash flow: materials and labour often have to be advanced long before being paid.
- Dependence on subcontractors: the failure of one of them can block an entire project and trigger penalties.
- Rising costs: surging prices of materials or energy, hard to pass on to quotes already signed.
- Loose management: underestimation of costs, overly optimistic quotes, lack of financial monitoring.
Telltale warning signs
A company in difficulty often sends signals before bankruptcy. For clients, certain signs should raise the alarm:
- Unusually high deposit requests, a sign of an urgent need for cash.
- Delays in starting or unexplained interruptions of the works.
- Frequent changes of subcontractors or staff.
- A reluctance to provide financial documents or certificates.
The consequences for the client
For an individual or a client, the bankruptcy of the company during the works is one of the most dreaded scenarios: deposit paid but works halted, guarantees hard to activate, and the need to find — often urgently and at a high price — another company to take over and finish the job.
The final cost then far exceeds the initial quote, not to mention the stress, the extra delays and any legal proceedings. Recovering your deposit from a bankrupt company is, in practice, very often illusory.
How to reduce the risk before signing
You can never eliminate the risk entirely, but you can greatly reduce it with a few simple reflexes.
- Look at the company’s financial health, not just the quote amount.
- Check the seniority, the insurance and the regularity of the filed accounts.
- Avoid disproportionate deposits and favour staged payments based on actual progress.
- Ask for recent references and, if possible, go and see completed projects.
- Favour companies able to prove their strength with an objective, verifiable element.
The value of an independent assessment
Assessing a company’s financial strength yourself is not easy: you need to be able to read a balance sheet, interpret ratios, compare several financial years. Few clients have the time or the skills.
This is exactly EuroCertif’s mission: to translate a company’s financial strength into a simple grade, from A+ to C, together with a project-capacity index. At a glance, and without being an accountant, a client knows who they can safely entrust their project to.