Business

Small enterprise shutdowns are retreating in the direction of the highs of the Covid pandemic

Small business closings in the US and around the world are sneaking back to their pandemic peaks, according to a report by Facebook and the Small Business Roundtable.

“It continues to be a very painful time for small businesses,” John Stanford, co-executive director of the Small Business Roundtable, told CNBC’s Worldwide Exchange on Thursday.

The report, which polled over 35,000 small and medium-sized businesses worldwide, found that 22% of US small businesses closed in February. Those numbers rose from 14% in October. At its peak in May, the pandemic closed 23% of small and medium-sized businesses – just 1 percentage point higher than the current closure rate.

While the closings are nearing Covid highs overall, the report found that different areas of the country had different levels of difficulty. Some states like Maine, Idaho, and Colorado saw closings of 9-10%, while others like New York, Pennsylvania, and Massachusetts saw at least 30% closed.

Within states, the report also found that certain populations were more affected than others: 27% of minority-run small and medium-sized businesses reported closings, compared with 18% of others. Businesses run by women saw a 25% closure rate, while 20% of men run businesses closed.

Small and medium-sized businesses continue to see the effects of the pandemic, although larger businesses have recovered relatively. “Small businesses really are our first line of defense for the business community,” said Stanford. “You feel the effects first, and those effects last the longest.”

“While larger companies with greater capital reserves are fine, small companies can’t just take the risk of staying open and I think we’re seeing that work off with these high numbers,” he added.

During a year of Covid’s shutdown, Congress instituted programs like the Payroll Protection Program to help small businesses keep their employees on payroll. Stanford said while the data shows that the PPP was “authoritative” for small businesses, these types of programs were not designed to be sustainable for a year.

“We have to remember that PPP was a bridging program,” said Stanford. “It was supposed to keep people on the payroll, it wasn’t exactly meant to keep companies open.”

According to the report, 27% of small and medium-sized businesses reported having to reduce their workforce – and 48% of those companies reported having to lay off at least half of their workforce. 51% of the companies surveyed said they have no plans to reinstate former employees within the next six months.

“PPP and others really helped us close one year of the economy, but I think we have a tough road ahead of us,” said Stanford.

However, 18% of small and medium-sized enterprises stated that they had already hired some of their employees within the last three months. The report found that these companies accounted for 60 to 70% of the workforce worldwide, so the prospect of a new hiring would be vital to the recovery of many economies.

Stanford said he was generally optimistic about the ability of small businesses to recover.

“Entrepreneurs are survivors. … We are reopening the economy, we are reopening states, when things return to normal we will return quickly,” he said. “If life recovers here in just a few months, small business numbers will turn around.”

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