SMEs are particularly at risk of failure from prolonged coronavirus (COVID-19) lockdown measures, and account for 75 % of all jobs in directly affected sectors.
An increasing number of countries have begun to impose containment measures in order to curb the spread of COVID-19 infections and, in turn, introduce significant financial support packages to mitigate the impact on firms and people.
Many of the firms are Small and Medium Enterprises (SMEs)1, which are particularly vulnerable to a prolonged lockdown. A March 10, 2020 survey by the business finance platform MarketFinance2, before the UK introduced containment measures, revealed that two-thirds of SMEs in the UK were already reporting severe cash-flow problems and one-third claimed they were likely to fold within weeks without support.
The economic sectors most directly affected by lockdown measures represent 40% of total employment on average across OECD countries
This Statistical Insight follows up on previous OECD analysis of the impact of containment measures on economic output3 and focuses on employment and SMEs. It zooms in on the same key activities flagged up in that earlier analysis, namely: transport manufacturing, construction, wholesale and retail trade, air transport, accommodation and food services, real estate, professional services, and other personal services (e.g. hairdressing). These sectors alone represent 40% of total employment on average across OECD countries (see Figure 2). The impact of a shutdown will of course vary by sector as some, for example food retail, continue to trade whilst many others, such as restaurants and cinemas, experience a complete halt in activity (see Spotlight on the real-estate and trade sectors below).
SMEs account for the bulk of employment in the most affected sectors
Although policy measures in many countries4 (e.g. support to firms to retain staff) will help to mitigate the potential for job-losses (as opposed to economic activity where falls are inevitable in the short-term), a prolonged slowdown will increase the risks of closures, especially in the vulnerable population of SMEs. Figure 3 shows that SMEs account for the bulk of employment in the most affected sectors: 75% on average across OECD countries and nearly 90% in Greece and Italy. Microenterprises with less than 10 employees, probably the most at risk of cash shortages, account for around 30% of employment in these sectors, and up to 60% in Greece and Italy.5