Brussels 'pretty grim' amid heightened terror alert

Brussels is under high alert, and business owners are anxious.

Belgian Prime Minister Charles Michel announced Monday that the city will keep its highest security alert level until next week, amid warnings of a possible terrorist attack similar to the one in Paris that killed 130 people. While Brussels' metro system and schools reopened on Wednesday, the Belgian and European Union capital remains under partial shutdown, with many businesses — especially those catering to consumers and pedestrian traffic — continuing to shutter their doors.

Brussels on Wednesday ended an unprecedented four-day shutdown of its schools and public transportation, but many shop owners still worry about the effect that increased security will have on their business. Some say the overall mood in Brussels is worse than in Paris because people fear an attack that the prime minister has described as both "serious and imminent." He noted that shopping malls, shopping streets and public transport are all considered potential targets.

"In Brussels, people were given very specific instructions to stay home and close their business," said Stacey Widlitz, president of SW Retail Advisors, a global retail consulting firm with offices in New York and London. "From a psychological point of view, local residents are fearful. They will not be in the mood to spend on material things."

In the city of about 1.2 million people, the lockdown began during the runup to Brussels' holiday tourist season. The capital typically attracts around a million people for the main Christmas fair that is scheduled to open Nov. 27. It's too early to determine the exact economic impact of the terrorist threat in Brussels, but if the immediate drop in tourism in Paris is an indicator, overall revenue in that industry will see significant declines.

According to Olivier Willocx, head of the Brussels Business Federation, some downtown hotels in Brussels saw 40 percent of bookings for the past weekend canceled at the last minute. The lockdown is especially difficult for locals not accustomed to large army vehicles rolling down their city streets and armed soldiers standing outside supermarkets.

"The past weekend was pretty grim," said Brussels-based Peter Vanden Houte, chief euro zone economist at ING, who noted nonetheless that it's the consumer-facing businesses that are taking the biggest hit. "The ones who are really suffering are the restaurants and the cafes. But the macroeconomic impact of what happened over the last couple of days remains limited even if the threat is the highest level it has been for a long time."

The streets of Brussels may appear empty, but many people, including ING's Vanden Houte, are working from home. Widlitz estimates that people will also shop from home, turning to online retail stores for presents. She predicts that e-commerce, which typically represents 10 to 12 percent of total global retail sales, will account for 15 to 20 percent of retail sales this year due to consumers' concerns about security.

"If you live in Brussels, holiday shopping is the furthest thing from your mind," said Widlitz. "People are focusing on their families, not their wallet. Maybe they spend more on experiences with friends and family. They will probably not go out and buy a luxury bag or a brand new tiny dress. This is not a feel-good holiday for them."

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