Industries most at risk due to COVID-19
Which goods and services are seeing the most disruption due to the coronavirus?
One of the most common ways countries are dealing with the novel coronavirus outbreak is to issue some form of a shelter-in-place order. These orders are designed to help flatten the curve and prevent hospital systems from becoming overwhelmed. Staying at home can help slow both infection and death rates globally, but a side effect of this approach is a slowdown in the global economy and the shutdown of countless businesses that aren’t considered essential.
While the government is sending checks of up to $1,200 to Americans and offering loans to select businesses (more on the Paycheck Protection Program later) as part of a $2 trillion stimulus bill, there’s growing concern that some industries may not be able to recover.
Finder analyzed research from both the government and private sector to assess the impact of the coronavirus on small businesses.
COVID-19 killing small businesses
Small businesses have borne the brunt of the coronavirus, with 45% forced to shutter operations either temporarily or permanently, according to an April 2020 Harvard Business School survey of 5,819 businesses. However, not all industries are affected equally.
Businesses that heavily rely on customer interactions have been hit the worst. Specifically, personal services such as hairdressers and nail salons have seen work dry up, with 86% of those working in the industry affected. Other industries faring poorly rely on the ability of patrons to either travel or come together in groups, driving the closure of 71.3% of businesses in arts and entertainment and 61.5% in tourism or lodging.
Small businesses in the banking and finance sectors are least affected, with only 19.2% closing their doors amid the crisis. Overall, 44.6% of industries on average are currently closed due to the effects of the COVID-19 health crisis.
|Arts and entertainment||71.3%|
|Tourism and lodging||61.5%|
|Restaurants and related||54.3%|
|All retailers, except grocery||52.2%|
|Health care and related||44.5%|
|Construction and related||32.4%|
|Banking and finance||19.2%|
What does the future hold for businesses still open?
For companies weathering the storm so far, almost 40% think they’ll be forced to shut their doors in the coming weeks, according to a report from the US Chamber of Commerce. Worse still, 43% of small business surveyed think they’re less than six months away from a permanent shutdown.
The report from Harvard has similar findings, with 36.6% expecting to shut down come the end of 2020. More than half (53.6%) of businesses still operating restaurants expect to close their doors. Other industries with bleak outlooks include those working in tourism or lodging, with 44.2% of businesses expecting to close by December, and another 44.1% of those in arts and entertainment.
|Industry||Percent expecting to be closed by December|
|Restaurants and related||53.6%|
|Tourism and lodging||44.2%|
|All retailers, except grocery||44.1%|
|Arts and entertainment||42.3%|
|Construction and related||38.3%|
|Health care and related||29.0%|
|Banking and finance||25.0%|
How long do businesses expect to survive?
How long businesses think they can last through the ongoing crisis has a lot to do with how they’ve been affected so far, which likely explains why those in banking and financial services are most optimistic about their prospects. When asked about the likelihood of remaining operational, 59% of businesses in the financial sector they’ll still be operational in six months. At the other end of the spectrum is those who run a restaurant, bar or catering company, where only 15% expect to still be in business in six months. On average overall, only 38% of businesses expect to remain operational in six months.
|Industry||1 month||4 months||6 months|
|Banking and finance||78%||63%||59%|
|Arts and entertainment||65%||45%||35%|
|All retailers, except grocery||69%||35%||33%|
|Tourism and lodging||66%||48%||27%|
|Restaurant, bar and catering||72%||30%||15%|
It’s no secret that the state of the national economy isn’t great, and those in service industries — restaurants, bars and catering — are feeling pessimistic, with only 15% of small businesses saying the national economy is in good health, according to a report from MetLife and the US Chamber of Commerce. They’re only slightly more confident in their local economies, with 20% reporting they’re in good health.
How long do businesses expect the crisis to last?
It’s said that your perception is your reality, which may explain why those working in arts and entertainment are so pessimistic about how much longer they’ll deal with the fallout of COVID-19, saying they expect the crisis to continue to affect their businesses for an average of 17.3 weeks.
Despite banking and finance managing to avoid the same closures as other industries, businesses in this industry foresee the crisis continuing for an average 16 weeks, which is also what those working in tourism and lodging say. Overall, industries expect the global health crisis to last an average of 15.4 weeks.
|Industry||Average number of weeks expected|
|Arts and entertainment||17.3|
|Banking and finance||16.0|
|Tourism and lodging||16.0|
|Health care and related||15.0|
|Construction and related||14.3|
|All retailers, except grocery||14.1|
|Restaurants and related||13.3|
Cash flow a major problem for small businesses
As the coronavirus outbreak drags on, a major issue small businesses face is cash flow, with 81.3% of small businesses concerned about their financial situation as a result of COVID-19, according to a March 2020 study by Small Business Investor Alliance.
Those most concerned? People working in entertainment and hospitality, where 100% of businesses report cashflow concerns. Other industries expecting cashflow issues include those working in basic industries (95.4%) and healthcare operators (86.9%), with an overall average of 81.3% of industries anticipating cashflow concerns.
|Industry||Percentage of small businesses|
|Entertainment and hospitality||100.0%|
|Transportation and warehousing||85.8%|
|Management and educational||83.3%|
|Wholesale and retail trade||80.8%|
|Finance, insurance and real estate||75.0%|
|Professional services and IT||66.4%|
As it stands, only two-fifths (40.60%) of small businesses believe they have the funds in reserve to make it 60 days, with that number jumping to an average of 66.90% when asked about enough money reserved to last beyond 60 days.
Businesses operating in the finance, insurance and real estate sectors say they’ve fared well so far in regard to closures, but cash reserves are running low, with 50% saying they don’t have the funds to last 60 days and 87.5% saying their money won’t last beyond 60 days.
|Industry||60 days||Beyond 60 days|
|Finance, insurance and real estate||50.0%||87.5%|
|Entertainment and hospitality||45.6%||77.3%|
|Wholesale and retail trade||40.8%||70.6%|
|Professional services and IT||40.2%||62.5%|
|Transportation and warehousing||39.3%||67.9%|
|Management and educational services||38.9%||63.5%|
While the outlook for many businesses looks bleak, 57% of small businesses report that their business is in good health. Leading the way are those working in professional services, where 64% report their business is in good health. At the other end of the spectrum is those in manufacturing or service industries, with only 52% of manufacturing firms and 53% of businesses in the service industry reporting their business in good health.
COVID-19 forcing small businesses to layoff employees
The coronavirus forced many businesses to make tough decisions in regard to staffing, with 21.3% of small businesses laying off or furloughing 26.7% of their workforce.
Small businesses operating in the entertainment or hospitality industries say they’re most hurt, with 50% of businesses either furloughing or laying off 85.6% of their staff.
|Industry||% of businesses with layoffs and furloughs||% of employees laid off|
|Entertainment and hospitality||50.0%||85.6%|
|Finance, insurance and real estate||24.9%||20.1%|
|Transportation and warehousing||18.0%||25.7%|
|Management and educational services||15.9%||27.1%|
|Wholesale and retail trade||14.7%||18.0%|
|Profressional services and IT||14.4%||13.7%|
Even worse, 64% of small businesses that have not yet begun layoffs anticipate they will lay off 30% of their staff.
What is causing cash flow and staffing problems?
Obviously, COVID-19 is the underlying cause of so many small businesses experiencing cashflow shortages and the need to lay off or furlough staff. But the Small Business Investor Alliance dug deeper into where small businesses whether business saw the loss of customers, a lack of revenue, supply chain issues or other causes as the major issue.
Lack of revenue is the driving force behind both staffing changes and cashflow problems in all but one industry. Almost half (45.9%) of businesses on average say a lack of revenue is the top factor causing cashflow and staffing problems.
|Industry||Loss of customer||Lack of revenue||Supply chain||Other|
|Wholesale and retail trade||2.1%||32.3%||43.7%||21.9%|
|Transportation and warehousing||7.4%||52.0%||18.5%||22.2%|
|Finance, insurance and real estate||0.0%||73.5%||6.6%||19.9%|
|Professional services and IT||10.1%||54.1%||7.4%||28.4%|
|Management and educational services||8.5%||40.5%||15.0%||36.1%|
|Entertainment and hospitality||4.5%||68.3%||16.6%||19.9%|
What does the future hold for hiring?
COVID-19 has seen a lot of churn in the job market. However, those new vacancies don’t look like being filled anytime soon. Just last quarter, 30% of small businesses anticipated hiring more staff in the next year. Now, only 23% of small businesses anticipate hiring more staff in the next year.
Across industries, a third of manufacturing businesses believe they will hire more staff — more than the average small business. Whereas, only 20%-22% of service, retail, and professional service businesses report that they will hire more staff in the next year.
What help is out there for small businesses?
In response to the coronavirus crisis, the Small Business Administration set up the Paycheck Protection Program to help small businesses affected by COVID-19 retain employees during the coronavirus outbreak and more.
Of industries taking advantage of the PPP, the construction industry accounts for 13.12% of all loans given out. However, businesses in professional, scientific and technical services have seen the greatest number of loans approved.
|NAICS subsector||Approved loans||Approved dollars||% of amount|
|Professional, scientific and technical services||208,360||$43,294,713,938||11.96%|
|Health care and social assistance||183,542||$39,892,493,481||11.65%|
|Accommodation and food service||161,876||$30,500,417,573||8.91%|
|Other services (except public administration)||155,319||$17,707,077,167||5.17%|
|Administrative, support, waste management and remediation services||72,439||$15,285,814,286||4.47%|
|Real estate, rental and leasing||79,784||$10,743,430,227||3.14%|
|Transportationg and warehousing||44,415||$10,598,076,231||3.10%|
|Finance and insurance||60,134||$8,177,041,995||2.39%|
|Arts, entertainment and recreation||39,670||$4,939,280,138||1.44%|
|Agriculture, forestry, fishing and hunting||46,334||$4,374,343,877||1.28%|
|Mangement of companies and enterprises||3,211||$1,170,748,130||0.34%|
Approved PPP loans and dollar amount by industry
|NAICS subsector||% of loans given out|
|Professional, scientific, and technical services||12.65%|
|Health care and social assistance||11.65%|
|Accommodation and food services||8.91%|
|Other services (except public administration)||5.17%|
|Administrative, support, waste management and remediation services||4.47%|
|Real estate, rental and leasing||3.14%|
|Transportation and warehousing||3.10%|
|Finance and insurance||2.39%|
|Arts, entertainment, and recreation||1.44%|
|Agriculture, forestry, fishing and hunting||1.28%|
|Management of companies and enterprises||0.34%|
No industry has fully escaped the impact of the coronavirus outbreak on the US economy. But it’s landed particularly hard on personal services, entertainment and hospitality industries.
And with popular emergency loan programs primarily funding industries that are better equipped to weather the downturn, the impact on these industries might worsen as the outbreak continues.
Businesses that are struggling to stay open during these times might benefit from considering all assistance options, rather than relying on hard-to-get federal loan programs like the PPP.
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