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.

IndustryPercentage closed
Personal services86.0%
Arts and entertainment71.3%
Tourism and lodging61.5%
Restaurants and related54.3%
All retailers, except grocery52.2%
Health care and related44.5%
Real estate38.1%
Construction and related32.4%
Professional services21.8%
Banking and finance19.2%

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.

IndustryPercent expecting to be closed by December
Restaurants and related53.6%
Tourism and lodging44.2%
All retailers, except grocery44.1%
Arts and entertainment42.3%
Personal services38.7%
Construction and related38.3%
Real estate30.2%
Professional services29.2%
Health care and related29.0%
Banking and finance25.0%

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.

Industry1 month4 months6 months
Banking and finance78%63%59%
Real estate74%56%56%
Arts and entertainment65%45%35%
Health care79%47%35%
All retailers, except grocery69%35%33%
Tourism and lodging66%48%27%
Restaurant, bar and catering72%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.

IndustryAverage number of weeks expected
Arts and entertainment17.3
Banking and finance16.0
Tourism and lodging16.0
Professional services15.7
Real estate15.6
Health care and related15.0
Construction and related14.3
All retailers, except grocery14.1
Restaurants and related13.3
Personal services11.7

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.

IndustryPercentage of small businesses
Entertainment and hospitality100.0%
Basic industries95.4%
Health care>86.9%
Transportation and warehousing85.8%
Management and educational83.3%
Wholesale and retail trade80.8%
Finance, insurance and real estate75.0%
Professional services and IT66.4%

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.

Industry60 daysBeyond 60 days
Finance, insurance and real estate50.0%87.5%
Health care48.9%75.6%
Basic industries47.6%76.2%
Entertainment and hospitality45.6%77.3%
Wholesale and retail trade40.8%70.6%
Professional services and IT40.2%62.5%
Transportation and warehousing39.3%67.9%
Management and educational services38.9%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 hospitality50.0%85.6%
Basic industries45.1%19.7%
Health care28.0%32.3%
Finance, insurance and real estate24.9%20.1%
Transportation and warehousing18.0%25.7%
Management and educational services15.9%27.1%
Wholesale and retail trade14.7%18.0%
Profressional services and IT14.4%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.

IndustryLoss of customerLack of revenueSupply chainOther
Basic industries5.5%66.8%5.5%22.1%
Wholesale and retail trade2.1%32.3%43.7%21.9%
Transportation and warehousing7.4%52.0%18.5%22.2%
Finance, insurance and real estate0.0%73.5%6.6%19.9%
Professional services and IT10.1%54.1%7.4%28.4%
Management and educational services8.5%40.5%15.0%36.1%
Health care5.0%55.1%0.0%40.0%
Entertainment and hospitality4.5%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 subsectorApproved loansApproved dollars% of amount
Professional, scientific and technical services208,360$43,294,713,93811.96%
Health care and social assistance183,542$39,892,493,48111.65%
Accommodation and food service161,876$30,500,417,5738.91%
Retail trade186,429$29,418,369,0638.59%
Wholesale trade65,078$19,489,410,4725.69%
Other services (except public administration)155,319$17,707,077,1675.17%
Administrative, support, waste management and remediation services72,439$15,285,814,2864.47%
Real estate, rental and leasing79,784$10,743,430,2273.14%
Transportationg and warehousing44,415$10,598,076,2313.10%
Finance and insurance60,134$8,177,041,9952.39%
Educational services25,198$8,062,652,2882.36%
Arts, entertainment and recreation39,670$4,939,280,1381.44%
Agriculture, forestry, fishing and hunting46,334$4,374,343,8771.28%
Public administration5,570$1,197,353,5860.35%
Mangement of companies and enterprises3,211$1,170,748,1300.34%

Approved PPP loans and dollar amount by industry

NAICS subsector% of loans given out
Professional, scientific, and technical services12.65%
Health care and social assistance11.65%
Accommodation and food services8.91%
Retail trade8.59%
Wholesale trade5.69%
Other services (except public administration)5.17%
Administrative, support, waste management and remediation services4.47%
Real estate, rental and leasing3.14%
Transportation and warehousing3.10%
Finance and insurance2.39%
Educational services2.36%
Arts, entertainment, and recreation1.44%
Agriculture, forestry, fishing and hunting1.28%
Public administration0.35%
Management of companies and enterprises0.34%

Bottom line

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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