McKinsey examines the effect of COVID-19 on SMEs
Noting a large rise in unemployment figures...
McKinsey has released a new report examining the economic impact of COVID-19 on small businesses in the US.
Noting a large rise in unemployment figures since lockdown measures were introduced in March, the consultancy company projects that as many as 33% of jobs may still be vulnerable, despite ongoing discussions about reopening the economy.
The strain is palpable for all enterprises, but McKinsey considers that SMEs (250 employees or fewer) are likely to face more arduous challenges - prior to the pandemic, they accounted for almost 50% of all private-sector jobs and now represent 54% of the most vulnerable.
The lower the staff size, the more vulnerable
The report found that approximately 50% of jobs within the smaller SMEs (99 employees or less) could be considered at risk, compared with 44% for those with 100-499 employees and 40% for 500.
According to this trend, the larger a company is the safer it is, and vice versa. “Two occupational categories—food service and customer service and sales—account for more than four in ten vulnerable small-business jobs,” added McKinsey.
There is a strong possibility, therefore, that the people most likely to reap the negative consequences will be those less able to weather them, such as lower wage or unskilled workers, the report reasons.
The solution: recognise the value of small businesses
The problem identified by McKinsey is not limited to any particular state or region of the US; Eastern (New York, Pennsylvania and Florida), Mid West (Illinois and Ohio), Southern (Texas) and West Coast (California) states have 1mn to 3.3mn jobs at risk each.
With small businesses representing such a large demographic, it is, therefore, imperative that sufficient investments are made to ensure their survival.
“Small businesses are a recognized proving ground for entrepreneurs, a vibrant source of innovation and competition, and an essential source of employment,” the report states.
“They are suppliers and customers to the broader economy and deeply embedded in local communities.”
In a previous article, Business Chief explored how Mastercard has created a five-year $250mn fund to alleviate the financial struggles faced by SMEs, as well as offering cybersecurity solutions to bolster digital defences
“When our small businesses suffer our nation suffers, so it is incumbent upon all to ensure that we’re supporting the businesses who are the lifeblood of our economy and pillars of our communities,” said Michael Miebach, President of Mastercard.
“We are leveraging our network, insights, technology and partnerships to deliver the resources small business owners need now to help them sustain their business as they quickly adapt to a new way of operating and evolved customer needs.”
To read the full McKinsey report, please click here.