Noticias / Business Cooperation

Eurochile survey: 81% of SMEs have a significant impact due to the COVID-19 crisis and 45% believe that they will not be able to continue operating in the face of mandatory quarantine

Survey carried out to 128 companies of different sizes and sectors that work with the Foundation – micro, small and medium – shows that 73% of them have already lost more than half of their usual income. Among the main measures they are requesting to mitigate the crisis are subsidies to keep jobs, postpone payment of taxes and a special program of loans for companies.

Publicado el 12/04/2020

In the context of the crisis caused by the global pandemic of COVID-19, and its impact on the country’s economy, Eurochile Business Foundation carried out a survey to 128 companies of different sizes and productive sectors of the country to see how they have been affected by this crisis, and know their opinion regarding possible support measures in this scenario.

“This survey seeks to find out the opinion of the entrepreneurs linked to Eurochile, regarding the effects that the current pandemic situation has had and will have on their businesses, and also what measures they consider most effective for the recovery. With this information, the Foundation can generate knowledge for decision makers and can also adapt its offer of support services to national SMEs”, explains Francisco Meneses, director of Strategic Development at Eurochile.

Most of the companies surveyed are micro-companies with less than 10 workers (52%) and small companies that have between 10 and 20 employees (30%), while 15% are medium-sized companies with up to 100 employees. Only 3% represent large companies. Of these, 30% correspond to tourism companies, 19% to services, 17% are consulting and education companies, followed by commerce and industry with 7% each, among the main ones.

Of these companies, 81% answered that the crisis caused by COVID-19 has affected them significantly, which explains the impact of the shutdown of numerous activities, while 12% say that the effect has been moderate. Only 7% of them indicate that the pandemic has affected them little or nothing.

This has strongly affected their income and the impact has been huge, to the point that 73% of the companies surveyed affirm that they have lost more than half of their usual income. Additionally, 19% of these affirm that the loss of income already ranges between 30% and 50%. Only 2% of the companies have had no impact on this matter.

Added to this is a significant increase in their operating costs for 43% of companies, mainly due to the protection and control measures they have had to implement to protect their workers from the COVID-19. For 27%, this increase has still been moderate.

Facing this scenario, only 23% of those surveyed think that if a mandatory quarantine was decreed in the country, they could continue, mainly because they are companies that can operate and provide services remotely. On the other hand, 45% of the companies will not be able to continue operating with a mandatory quarantine, a figure that increases to 70% in the case of the tourism sector.

As Francisco Menses explains, a health crisis like the one we are experiencing has a huge negative impact on economic activity because – unlike other scenarios – it simultaneously affects offer and demand.

“Productive capacity,” he points out, “is limited by the quarantine with regard to the workers and employers, and at the same time, it is difficult for consumers to access products and services. And as activity diminishes, income also falls and there is a multiplier effect. This is especially severe in service sectors, and in particular the tourism industry, an area in which Eurochile has supported for many years. Additionally, as it is a global crisis, this phenomenon also strikes Chile from abroad, as demand for our exports, especially copper, decreases”.

Measures to get out of the crisis

 How to get out of this crisis? The survey shows that the most effective measure – in the opinion of SMEs – is to offer a subsidy to the company to encourage maintaining their workers (59.4%), and it is followed by two measures related to credit: postponing the payment of taxes (57.8%) and establishing special loans for companies (57%).

Other measures proposed are of a tax nature, such as reducing income tax (45.3%) and reducing VAT (40.6%). With less approval, other options appear such as: support workers by allowing them to use their unemployment funds or pension funds during the emergency, with 37% and 34%, respectively.

According to Meneses, companies operate -simply- buying, working, selling. If they don’t sell, they have no resources to work or buy. If they have payment commitments with suppliers or workers, the lack of sales for a period simply means collapse. In general, the smaller the company, the less resources it has as ‘working capital ‘as well as access to credit, and therefore the shorter the period it can be without sales. Therefore, the measures that ease this pressure are the most valued by SMEs.

“Among these financial relief measures, subsidies are valued first, which is obvious since these are resources that should not be reimbursed. Next, the most important thing is to postpone payments. Not so much that they reduce the tax rates (except for the large companies, which do propose it) but rather to be able to temporarily ease their cash flow needs, receiving new credits or postponing the payment of taxes. Below are the measures that allow workers to maintain their income, which – although they are important – are not the most urgent for the employer, ”explains the director of Strategic Development at Eurochile.

Severe economic impact and technological challenge

According to the analysis by Francisco Menses, the first conclusion of the survey applied to companies that work with Eurochile is the economy due to the current situation. This is because the survey shows that -in just one month- entrepeneurs have been severely affected.

Indeed, 81% say this has affected them significantly and 73% say their income is cut in half or less. Although most of them see that this situation will last between 4 and 12 months, only 23% affirm that they could maintain their business if a massive quarantine was decreed. This means that the future looks even darker than the present. ”

Likewise, when asking about more qualitative opinions, very few entrepreneurs mentioned the need or possibility of expanding their use of digital technologies to communicate, buy, work and sell, which in turn, could reduce the impact of quarantines. By absence, this is also a conclusion of the survey.

“The technological gap that still exists in the business world, and especially in SMEs, is verified.

Despite the high availability of computer equipment and smartphones in Chile, and relatively high internet coverage, very few SMEs have incorporated these technologies into their business. This is a line that must be explored, not only to face this pandemic but also as a mechanism for reducing costs and accessing markets, permanently, “explains Meneses.

And in the case of tourism, he adds, “that gap was already being noticed because many small businesses associated with unique natural attractions in the world, were having difficulties securing their promotion, reservations, charges, etc., against a potential world demand characterised by connected youth. Without a doubt, the digitalisation of SMEs is a challenge that must be urgently addressed”.