The Impact of Covid-19 on Small and Medium Enterprises

The Central Bank of Ireland has released a report reviewing the challenges Irish small and medium-sized enterprises are facing due to Covid-191. The findings of the study are valid for most of the world. We publish the main results here.

Since the beginning of 2020, 20% of small businesses have reported an alarming 75% drop in turnover. However, this decline is highly dependent on the profile of the company. Companies from the Accommodation and Food sector suffered the most, companies from the Retail and Wholesale sector suffered the least.

Firms, whose revenues fell more than 50%, cut their costs by more than 40%. However, costs were not cut at the expense of staff. The Accommodation and Food sector has cut costs the most. About half of the firms in this sector have cut costs by more than 50%.

40% percent of firms have unpaid bills. This accounts for about 20% of the revenue. The pressure on cash flow is inevitable. 42% of firms report deferred payments. In the Accommodation and Food sector, this figure is 91%.

Small businesses often do not have access to bank financing due to the lack of a bank lending relationship. This is especially true for microfirms. 20% of firms in the hardest hit Accommodation and Food sector are in debt over half of their turnover. However, 44% in this sector have no debt to the bank. At the same time, it is not clear whether they can count on loans at all.

These consequences of the coronavirus crisis have of course also affected the big business. However, small and medium enterprises are more vulnerable. Economic indicators will decline further, so the business owner should think about ways that can reduce the negative consequences.

1SME Market Report 2020, The Central Bank of Ireland’s