More than a quarter of small businesses closed during pandemic, survey finds

Three in four companies expect to reopen as restrictions ease, global study shows

Facebook started Shops platform to help small and medium businesses in May as e-commerce surged amid the pandemic. Reuters
Facebook started Shops platform to help small and medium businesses in May as e-commerce surged amid the pandemic. Reuters

More than a quarter of small and medium enterprises around the world closed their doors at some stage in the first five months of the year due to the Covid-19 pandemic, according to a new survey.

This number surged to more than 50 per cent in some countries such as Ireland and Bangladesh while nearly 75 per cent of companies that had closed expected to reopen as restrictions eased, the survey by Facebook, the World Bank and the Organisation for Economic Co-operation and Development showed.

“The path to recovery is uncertain and many small and medium businesses (SMBs) may need support from governments or other institutions to get back on track,” said Sheryl Sandberg, chief operating officer of Facebook.

“Still, entrepreneurs are resilient people … many are optimistic about the future,” she said.

The report, which surveyed more than 30,000 SMB owners, managers and employees in more than 50 countries in May, defined SMBs as those with 500 or fewer employees. SMBs tend to differ from SMEs by employment, with the former often relying on part-time workers or outsourced staff and the latter employing full-time workers.

In two thirds of the countries surveyed, at least 50 per cent of SMBs said they were optimistic, or very optimistic, about the future of their business.

In Saudi Arabia and the UAE – the Arab world’s two biggest economies – optimism was slightly higher than the global average at nearly 60 per cent. Sixty-five per cent of respondents in the two countries said they were still engaged in revenue-generating activities.

Among the SMBs globally that remained open even during the coronavirus outbreak, nearly half (45 per cent) said they would not close their business, even if the pandemic remains widespread beyond the next six months.

SMBs decline in sales
SMBs decline in sales

Many companies have adapted their businesses by developing their digital capabilities.

Worldwide, at least one-third of SMBs indicated that they had earned a minimum of 25 per cent of sales from digital channels during movement restrictions. The UAE, due to its high levels of internet penetration, was ahead of the global average at 40 per cent.

Almost 33 per cent of operational SMBs globally said they had reduced their workforces to survive, a “worrying sign of what could be a lengthy jobs crisis”.

Courtesy Facebook
Courtesy Facebook

The Covid-19 pandemic and the resulting economic shutdowns have had a major impact on SMBs throughout the world. Most governments imposed movement restrictions that forced many businesses to close workplaces and created other significant challenges.

Nearly 62 per cent of those surveyed said sales were down on the same period last year. Out of these, more than half (57 per cent) reported a decline in sales of 50 per cent or more.

“SMBs are vital to the global economy and play a big role in Facebook’s community ... since the early days of the pandemic we have taken steps to help them weather the storm,” said Ramez Shehadi, managing director of Facebook for Middle East and North Africa.

“That is why we recently launched Facebook Shops to make it easier to sell online and created our business resource hub, where owners can get training, advice and information … including guidance from healthcare experts,” he said.

Tourism and other consumer-focused businesses were hit particularly hard.

The sectors with the most business closures include travel (54 per cent), hospitality and events (47 per cent), education and childcare (45 per cent), performing arts and entertainment (36 per cent) and hotels and restaurants (32 per cent).

Looking ahead, the path to recovery remains uncertain and further support measures may be needed, the report said.

Nearly 32 per cent of SMBs emphasised the need for tax deferrals and 29 per cent pressed for easy access to loans and credit.

The three near-term challenges most commonly cited by businesses that were operational at the time of the survey were lack of demand (47 per cent), cash flow constraints (37 per cent) and repaying outstanding loans (19 per cent).

Updated: July 15, 2020 04:08 PM


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