One in 10 SMEs in Europe may file for bankruptcy in six months, finds McKinsey survey
One in 10 Small and Medium Enterprises (SMEs) in Europe are likely to file for bankruptcy as they face existential crisis due to the spread of Covid-19.
A recent McKinsey survey, conducted in August, 2020, of more than 2,200 SMEs in five European countries—France, Germany, Italy, Spain and the United Kingdom— indicate they have been hit hard by the pandemic and 11% of them might have to file for bankruptcy in six months.
As many as 13% respondents in France, 11% in Spain, 10% each in Germany and Italy and 9% in UK said they are likely to file for bankruptcy in the next six months.
Concern was highest among the largest companies (those with 50 to 249 employees) in Italy and France, where 21 percent—almost double the average—expected to file for bankruptcy in the next six months. By comparison, sole traders in Spain were most concerned, with 19 percent expecting imminent bankruptcy compared to only 6 percent of companies with 50 to 249 employees.
Among industrial sectors, logistics had by far the highest number of expected bankruptcies (22 percent). Agriculture, accommodation, food services, retail, and wholesale followed, though at a considerably lower rate (13–15 percent).
SMEs are the backbone of the European economy, accounting for more than two-thirds of the workforce and more than half of the economic value added.
The survey found that 55% of respondents believe if revenues were to remain same as now, they may shut down by September 2021. As many as 77% believe that if situation worsens and revenues decreased by a further 10 -30%, they may be out of business by September 2021.
What is more worrying that 39% of the SMEs surveyed believe even if the situation improves and revenues increased by 10 -30% they may nevertheless be out of business by September 2021.
Several European countries have offered liquidity support to SMEs. The survey shows that 20% of the respondents have already used those supports while 30% more are planning to do so in future.
