Industries most at risk due to COVID-19

Which goods and services are seeing the most disruption due to the coronavirus?


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Man standing in his empty business during coronavirus pandemic

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.

Industry Percentage closed
Personal services 86.0%
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%
Real estate 38.1%
Construction and related 32.4%
Professional services 21.8%
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%
Personal services 38.7%
Construction and related 38.3%
Real estate 30.2%
Professional services 29.2%
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%
Real estate 74% 56% 56%
Professional 79% 63% 54%
Construction 72% 43% 45%
Arts and entertainment 65% 45% 35%
Health care 79% 47% 35%
All retailers, except grocery 69% 35% 33%
Tourism and lodging 66% 48% 27%
Personal 57% 40% 22%
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
Professional services 15.7
Real estate 15.6
Health care and related 15.0
Construction and related 14.3
All retailers, except grocery 14.1
Restaurants and related 13.3
Personal services 11.7

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.

Industry Percentage of small businesses
Entertainment and hospitality 100.0%
Basic industries 95.4%
Health care >86.9%
Transportation and warehousing 85.8%
Other 84.5%
Manufacturing 83.7%
Management and educational 83.3%
Wholesale and retail trade 80.8%
Construction 76.8%
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%
Health care 48.9% 75.6%
Other 48.9% 55.6%
Basic industries 47.6% 76.2%
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%
Manufacturing 38.4% 65.7%
Construction 26.7% 63.3%

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%
Basic industries 45.1% 19.7%
Other 35.8% 26.7%
Health care 28.0% 32.3%
Finance, insurance and real estate 24.9% 20.1%
Construction 20.7% 13.2%
Manufacturing 20.3% 22.3%
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
Basic industries 5.5% 66.8% 5.5% 22.1%
Construction 7.1% 7.1% 7.1% 28.6%
Manufacturing 2.6% 37.2% 31.2% 29.0%
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%
Health care 5.0% 55.1% 0.0% 40.0%
Entertainment and hospitality 4.5% 68.3% 16.6% 19.9%
Other 0.0% 63.5% 16.6% 27.6%

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
Construction 177,905 $44,906,538,010 13.12%
Professional, scientific and technical services 208,360 $43,294,713,938 11.96%
Manufacturing 108,863 $40,922,240,021 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%
Retail trade 186,429 $29,418,369,063 8.59%
Wholesale trade 65,078 $19,489,410,472 5.69%
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%
Educational services 25,198 $8,062,652,288 2.36%
Information 22,825 $6,675,630,276 1.95%
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%
Mining 11,168 $3,894,793,207 1.14%
Public administration 5,570 $1,197,353,586 0.35%
Mangement of companies and enterprises 3,211 $1,170,748,130 0.34%
Utilities 3,247 $1,027,575,137 0.30%

Approved PPP loans and dollar amount by industry

NAICS subsector % of loans given out
Construction 13.12%
Professional, scientific, and technical services 12.65%
Manufacturing 11.96%
Health care and social assistance 11.65%
Accommodation and food services 8.91%
Retail trade 8.59%
Wholesale trade 5.69%
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%
Educational services 2.36%
Information 1.95%
Arts, entertainment, and recreation 1.44%
Agriculture, forestry, fishing and hunting 1.28%
Mining 1.14%
Public administration 0.35%
Management of companies and enterprises 0.34%
Utilities 0.30%

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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