June 20, 2021

COVID reduced sales of smaller companies by almost 20% and employment by 10% in 2020


The COVID-19 pandemic reduced the turnover of companies with fewer than 49 workers by almost 20% last year and employment by 10% in these types of companies, above the damage suffered by larger companies, by This time that affected the hospitality sector to a greater extent, with a decline in sales of 45.5% and 35% in the case of employment, and other services, with falls of 32.2% and 19.4% , respectively, according to Europa Press.

Pedro Sánchez announces an extra 11,000 million euros for hospitality and tourism

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Pedro Sánchez announced this Wednesday that in the coming weeks the Government will approve an additional package of aid for an amount of 11,000 million euros for the sectors most affected due to the crisis left by the COVID-19 pandemic. The president has taken advantage of his appearance in Congress on the occasion of the state of alarm to put a figure on the extra package that will be aimed at companies, SMEs and the self-employed in sectors such as tourism, hotels, small businesses and restaurants.

In addition, companies located in rural areas suffered a lower impact of the pandemic on their turnover and employment than those located in urban centers. This is clear from an analytical article on the economic impact of COVID-19 on Spanish companies, according to the Bank of Spain survey on business activity with more than 4,000 responses received, which reflects that the COVID crisis had an impact “very uneven” in 2020 by sectors and regions.

The results show that turnover and employment fell more in smaller companies and that the crisis has had more negative effects on the youngest companies, the least productive and those located in urban areas, within each sector and region. In the case of employment, a higher temporary ratio is associated with greater declines in employment.

According to the results of the survey, the crisis derived from COVID reduced turnover by 16.1% in all Spanish sectors and employment contracted by 8.6% last year.

By sectors, the average company that operates in the hospitality industry experienced, at the end of 2020, a 45.5% drop in its turnover compared to the same period in 2019, while this decrease was 12.7% in the manufacturing industry and 32.2% in other services. They were followed by administrative services (-16.8%), transportation (-16.3%), commerce (-15.6%) or construction (-12.2%).

In the case of employment, although the decreases were smaller, the disparity between branches remained, so that the respective decreases in the manufacturing industry and in the hospitality industry were 5.5% and 35%, respectively. After the hotel and catering industry, the greatest reduction in employment occurred in other services (-19.4%), administrative services (-11.9%), commerce (-7.3%) and construction (-5.2%).

Less impact on employment due to ERTE

The Bank of Spain explains that the comparatively higher decline in turnover in relation to employment is a characteristic that is observed in a generalized way by activity branches, which confirms the evidence from other sources, such as the National Accounts, that the occupation has withstood the effects of the crisis better than the added value.

The relatively moderate impact on employment may be related, according to the agency, to the fact that, although persistent, the crisis is perceived as a “predominantly transitory” event, which would have been reflected in the widespread use of ERTE.

It also indicates the existence of substantial differences in the characteristics of the companies by branches. For example, compared to hospitality, manufacturing companies are, on average, 40% more productive and eight years older; they are more frequently located in a rural setting; they have less debt, and their size, measured by the number of employees, is higher.

Regarding the impact of the COVID shock depending on the size of the companies, in terms of sales, the smallest companies suffered a more pronounced fall, of 19% year-on-year in those with less than 10 employees and of almost 18 % in those with a number of workers between 10 and 49.

For their part, although medium and large companies also suffered the effects of the crisis with intensity, they reported decreases somewhat less marked, close to 12%. Specifically, 12.6% in companies with between 50 and 249 employees, and a decrease of 12.4% in those with more than 250 employees.

Regarding actual employment (discounting ERTE), the impact of the crisis was also lower in larger companies, with decreases of 5.9% in those with more than 250 employees and 7.2% in those with between 50 and 249 workers, respectively, compared to the decline of approximately 10% in the smallest companies.

Smaller companies exhibited a more intense decline in their activity

The smallest companies exhibited a more intense decline in their activity in 2020 than the larger ones belonging to the same activity sector. In particular, in companies with fewer than 10 employees, turnover fell 1.3 percentage points more than the industry average, while in large companies it was 4.4 percentage points higher than the average.

In the case of employment, small companies also reported a greater drop than large ones in effective terms. The supervisory body points out that these differences are due to the “greater vulnerability” of small companies due to their lesser possibilities to access external financing, as well as their less diversification by products and markets.

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