Small business hit by Covid-19
The worldwide spread of Covid-19 since the end of December 2019 has had a mammoth impact on the world economy like never before. Besides the alarming mortality rates, what has impacted the most are businesses, particularly small enterprises. Let’s take a closer look at the impact of Covid-19 on small businesses.
It’s been more than seven months that COVID-19, from being a news headline, walked into our lives undeterred, breaking all thoroughfares, pushing each one of us into the confinement of our homes. The medical and mortality statistics being just one part of it, COVID-19 has been a death bolt for businesses all across the world.
Gradually, the unemployment statistics superseded the mortality numbers. Photographs of moulds growing on luxury leather items in the Malls that have been closed down for months started becoming viral making the impact of COVID-19 on small businesses loud and clear.
The cruelty of the situation became more apparent when thousands of Indian labourers were left with no choice than to turn homewards on their feet. No small business had the contingency fund required to sustain their employees through this pandemic.
The US Story
According to a McKinsey report, as good as 30 million jobs in small businesses in the US are at risk and enterprises with less than 100 employees are the ones that are bearing the brunt of the economic downfall. In the pre COVID-19 periods, this segment accounted for 54% of the private jobs in the US.
Positions such as the waiting staff at restaurants, sales, and customer service staff account for four out of 10 jobs – are at the highest risk. The condition is worse for lower-wage staff with inadequate educational qualifications.
In the US, places like California, Texas, Ohio, Florida, New York, Illinois, and Pennsylvania, as good as 1-3.5 million jobs in small businesses are at stake. It has been reported that both public and private sectors have come together to support the small businesses in the US.
The worst-hit segments in India include:
- The apparel segment attributes for 2 percent of the GDP, employs 45 million people (2018-19 report). It is a major exporter to international markets in the UK, US, Canada, Italy, Russia, Japan, and UAE. According to the report published by KPMG, the apparel segment has experienced high impact due to production shutdown, lay-off of the labor force, cash constraints, a drastic cut from the export and import markets, and low consumption in the domestic market.
- Automobile and Auto Components contributed 7.1 percent and 2.3 percent to the GDP, creating employment for 40 million, catered majorly to the U.S, Asia, Bangladesh, and some regions of Africa. This sector is experiencing a high impact.
- Aviation and Tourism – Aviation creates 8 million jobs contributing a substantial USD 72 billion to the country’s GDP. Tourism employs 42.7 million jobs and attributes for 9.2 percent to India’s GDP. Covid-19 impact on airline business has been high owing to mass cancellations. Airline business together with the hotel and tourism segment is anticipated to incur a loss of Rs.85 crore billion.
- Building and Construction – A segment that is the largest employment provider and supporter of 250 allied industries, is expected to reach USD 1 trillion by 2030. COVID-19 has had a high impact on this segment.
- Retail – Contributes 10 percent of the GDP and 8 percent of employment, the USD 950 billion worth retail segment is highly impacted due to the COVID-19 pandemic.
- Other major segments that are majorly hit include the education sector, financial sector, food service, and wellness sector that includes gymnasiums, salons, and Day Spas.
According to a survey conducted by the International Trade Centre in 1200 companies in 109 countries out of which 60 percent of the respondents have reported to be affected due to lockdown, quarantine, and other measures adopted to contain COVID-19 cases. This has hit the demand as well as the supply side of their businesses. However, the degree to which each business has been affected differs from one another.
As per the survey reports, one out of every four micro, small and medium enterprises has been affected to the extent that they run the risk of shutting down in the next three months. These businesses need immediate support from the government.
What are the real challenges?
- Most of the companies in the high-risk category lack adequate cash flow to sustain their business.
- Most of them do not have access to information about government aid.
- And even if they get the information, they do not know how to avail them.
Duration of The Crisis Situation
The implementation of the lockdown created a lot of disruption for private businesses. Even though businesses anticipated loss during this period, they took it in their stride thinking it to be the cost of saving their lives. It was further anticipated that people had to stay indoors until the vaccination was out. With the hope that normalcy will return soon, people complied with the regulation for containing the viral outbreak.
Each country declared financial packages and supporting aids to the best of their capacities. Yet the COVID-19 impact on business and economy could not be avoided. However, almost eight months into it, the vaccination or even a cure is far from reaching the people. In such a scenario, a possible end of this crisis scenario cannot be predicted.
In India, the process of unlocking has been initiated and businesses have been made operational while maintaining the safety protocols as much as possible. People have made up their minds to carry on with their lives taking the virus on their stride. Even some of the state government indicated that the virus is here to stay and we have to learn to live with it.
Support Policies Deployed by Government
The governments of each country have taken actions to control the impact of the COVID-19 pandemic on businesses and are also making strategies for the recovery. Indian Prime Minister announced an economic package of Rs.20 lakh crore apart from leniency in the form of a moratorium for loans, extension of deadlines for income tax returns, etc.
The Way Ahead
COVID-19 is perhaps the biggest movers and shakers of all times in the literal sense of the term. It is an evolutionary phase and a testing time as well. But the best part is that industries all across the world as well as the government have stood in solidarity with each other. This pandemic has thrown us out of our comfort zones. It is the time when the entire business segment will go through a deconstruction and reconstruction phase. By the end of July 2020, the dynamism in the industry, the enthusiasm among the business owners as well as employees is like never before. We have hit the rock-bottom already and now it’s time to bounce back and reach the stars.