Every fifth small business may shutdown due to the quarantine – EBA survey
As reported by the express survey conducted by the European Business Association among representatives of small and microbusiness – participants of the Unlimit Ukraine project, about 18% of respondents consider closing their businesses, 78% report losses of income up to 75%, and only 4% stand out with increased profits for the company.
The economic impact of a coronavirus pandemic is extremely severe for small businesses. They must overcome this crisis with the fewest losses possible because a successful small business is a benchmark of a progressive economy and the basis of a strong middle class. Small business provides employment, however, due to the slowdown in business activity, some will have to reduce the staff size and cut the salaries.
Thus, among the respondents, 41% plan to adjust the staff salaries, 33% have not yet decided, and 26% of business owners will keep the current size of salaries.
It will be necessary to reduce the number of employees in 31% of enterprises, while 21% are undecided and 48% of respondents do not plan any staffing cuts.
Perhaps the entrepreneurs are most worried about the uncertainty of the current situation. In circumstances when the duration of quarantine and changes in consumer behavior are hard to predict, it is almost impossible to elaborate any scenarios for business development. The decline in the number of orders, the disruption of procurement and delivery terms, the paralyzed sales channels are just a few problems facing small businesses. While many companies have a substantial decrease in their revenues, expenditures remain virtually unchanged (rent, utilities). More worries added up with shifting to the remote work and organizing employee transportation when the movement is restricted.
Whenever possible, companies try to adapt to the situation and reorient themselves. Certainly, some businesses are fortunate to increase sales and their operating revenue in this situation. For example, small grocery stores have an increase in the number of visitors due to the same restriction of movement that makes people choose local outlets instead of supermarkets.
Despite all the challenges of the situation, entrepreneurs remain optimistic for the most part. Thus, 47% will look for new development opportunities in case of the indefinite duration of the quarantine. At the same time, 22% of respondents will have to close their businesses. However, due to the unpredictability of the situation, business sentiment may change.
The quarantine is a really difficult period, especially for those companies that cannot switch their businesses to online operations. No one knows the further developments. Hardly anyone was prepared for such kind of crisis. Therefore, most businesses will take decisions based on the circumstances. However, it is obvious now that if the restrictive measures are extended, many small businesses will have to cut costs significantly, reorganize their businesses, seek investors, or completely terminate their operations. I hope that the latter can be avoided.
For the reference:
The survey was conducted from March 23 to March 30, 2020 among the companies of Unlimit Ukraine Project. 155 entrepreneurs – representatives of small and medium businesses joined the survey.
Unlimit Ukraine is a small business and microbusiness development platform created on the basis of the European Business Association. The project provides comprehensive support for small and microbusiness through educational events and consultations, participation in special projects, diagnostics of business problems and discussion of issues relevant to it. The participants of the project can be small and micro-businesses with the ownership of FOP without limitation of activities. Today, Unlimit Ukraine includes more than 1811 participants.