Economy The great corporate drain in 2020: 125 closings a...

The great corporate drain in 2020: 125 closings a day and 76% with fewer than 10 employees

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The pandemic in 2020 left a historical record of companies closed with the disappearance of 44,759 companies from the records of the Social Security. This is equivalent to an average rate of 125 companies closed each day, although the truth is that the bulk of casualties were concentrated during the months of strict confinement after the State of Alarm decree. From then on, the number of ‘live’ companies gradually recovered until it stagnated again in the last months of the year.

A more in-depth analysis of the figures offered by the Ministry of Labor and Social Economy allows to illustrate the company profile most affected by the coronavirus crisis. It is a company with fewer than 10 employees, known as micro-SMEs, and dedicated to the hospitality or entertainment sector.

In total, 34,062 companies with less than 10 employees were withdrawn from Social Security in the last year. Many of them were bars or restaurants whose businesses were temporarily closed or suffered severe capacity restrictions for several months of the year. The data is chilling: in Spain on December 31 there were 8.5% fewer hospitality companies than at the end of 2019. In other words, almost one in ten bars has disappeared. The proportion is similar in the group of companies dedicated to artistic activities and entertainment in which cinemas are located, for example.

The closing of 2020 multiplied by more than seven the number of companies that lowered the blind in 2019, when one of the biggest economic problems in Spain was the slowdown in GDP until it grew ‘only’ one 2%. You have to go 11 years back in the statistical series, until the lousy 2009, to find a higher number of closings.

In any case, both figures are not entirely comparable since in the current crisis tens of thousands of companies are still operating thanks to liquidity programs endorsed by the State. These mechanisms have been a double-edged sword that did a great job in the first phase of the crisis, since they allowed companies not to withdraw while they were closed due to sanitary restrictions.

However, many of those who obtained these loans today are in a much worse situation than in March: their businesses have not started and their balance sheet is much more in debt. According to the Bank of Spain, 10% of these companies are for this reason at risk of liquidation. In round numbers, 130,000 companies on the brink of bankruptcy.

The big question now is to know what will happen in the year 2021. January, now over, has been a very bad month for the economy, as reflected by the great loss of affiliates published by the Ministry of Labor or others data such as the 51% drop in registrations of known vehicles this Monday.

These setbacks have led some analysts such as the British bank Barclays they already forecast an economic contraction of 0.8% for the country in the first quarter of the year. The AiRef He also warned today that the first month of the year has been bad, with an estimated drop in GDP of 0.7%. The general consensus is that GDP will pick up strongly as of spring, although this will depend in any case on external factors such as the fact that the promised vaccines are received.

While that moment arrives, the main business associations urgently request direct aid and restructuring and refinancing mechanisms that allow them to balance their financial statements. “We are still far from the whole health problem being solved and real aid is needed because the guarantees are on loans that must be repaid and the companies are closed, or at half gas, but their expenses remain,” he warned yesterday the president of Cepyme, Gerardo Cuerva, in an interview in EL MUNDO.

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