Pandemic Crisis Worsens: More Than 50% Of Europe’s Smaller Businesses Expected To File For Bankruptcy Within The Year

It appears that it is not just small and medium-sized businesses in the US that are being decimated by the coronavirus pandemic. SME’s across Europe’s top five major economies fear they will have no choice but to shut their doors within the next 12 months of the pandemic situation does not improve.

According to a recent McKinsey survey that questioned more than 2,000 SMEs across Germany, Spain, France, Italy, and the UK, over 70% of companies have had their revenues subdued as a result of the pandemic. Some of the hardest-hit businesses are in Spain and Italy, where 33% and 30% of SMEs respectively noted that their revenues had fallen significantly. Meanwhile, almost half of the businesses polled in the two countries where pandemic-related lockdowns were the most strict said their revenues were “somewhat” subdued.

However, the poll was conducted in August, when much of Europe was in a recovery phase following its detrimental first wave of the virus; nonetheless, a large portion of the companies surveyed expressed a declining sentiment over the wellbeing of the European economy. Given the current trajectory though, 11% of SMEs will likely file for bankruptcy within the next six months, with twice as many companies filing that employ between 50 and 249 people. The highest amount of bankruptcies are expected in the logistics sector, followed by the agriculture, accommodation and food services, in addition to wholesale and retail.

If indeed the poll is a true representation of economic sentiment amid businesses across Europe, then almost a third of jobs may soon be at risk within the next 12 months. The Mckinsey report noted that a rebound for the European economy would be significantly stalled or reversed if pandemic lockdowns and closures are once again reinforced – a measure that is becoming more likely with each passing day as Europe braces for a second, much more deadlier second wave.

The coronavirus pandemic caused severe economic contractions that have not been witnessed since the Second World War. In just the second quarter alone, GDP levels in both the Euro area and the EU fell by 11.8% and 11.4%, respectively. According to preliminary projections, the EU economy is expected to contract by 8.3% by the end of the year as a result of the pandemic.

Information for this briefing was found via McKinsey & Company. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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