The European economy relies heavily on small and medium enterprises that engage two-thirds of the workforce and adds more than 50% of economic value. It will not be wrong to say that small businesses drive Europe’s prosperity. However, Covid 19 pandemic has severely hit small businesses across Europe as revenues dipped as much as 70 percent when the pandemic was on the rampage. Lay-offs and loan default by business owners became almost inevitable as businesses struggled to stay afloat amid tremendous economic uncertainty. Almost 20% of business owners were susceptible to turning loan defaulters as found from a 2020 survey by McKinsey & Company. The scenario was so gloomy that despite governments extending financial and other assistance to businesses, almost half of small business owners were skeptical about their business’ survival beyond 12 months.
Lower revenues
Revenue fall affected the vast majority of SMEs but the extent of losses varied according to the economy of the respective countries. The severity of measures to control the novel coronavirus and their impact on businesses had a direct effect on the quantum of losses. For example, the revenue shrinkage for Spanish and Italian small businesses in 2020 was 33 percent and 30 percent respectively, the hardest hit countries in Europe. On the other hand, for small businesses in Germany, the revenue losses were 23 percent.
Weakened financials
The pandemic has left small businesses distraught by weakening their financials. Weak finances made it difficult to keep the business afloat as retaining employees by paying salaries was almost impossible for most businesses. Even paying for leases and loans was a far-fetched idea. Almost 30 % of Spanish small businesses were unable to pay loans but the figure for Germany was only 19%. Again, 38% of Spanish small businesses felt that they might not be able to retain their employees whereas only 16 percent small businesses in France and Germany felt that way.
Staffing problems
All countries across Europe faced a similar problem with staffing and were unable to maintain their operations as most of the workforce was falling sick. Almost 14 percent of small businesses faced such problems.
Amid all the bad things that happened to small businesses during and after the pandemic is that the pandemic greatly accelerated the digital transition in Europe, pushing it ahead by almost seven years. Consequently, it will change the work culture as almost 20% of work hours will be moving homeward from the office ushering in new ways of living.