Israel could see a 50 percent jump in the number of businesses shutting down this year, to some 70,000, because of the coronavirus crisis, business data firm Dun & Bradstreet forecast in a report on the pandemic and its impact on the Israeli economy.
This year will thus become the first year in a decade in which the number of businesses that close down will overtake the number of businesses that have opened this year, the report said, with a net contraction of 30,000 businesses, compared to a net growth of 11,000 new businesses in 2019, the report said.
In the past few years, some 55,000 new businesses were set up annually, while some 40,000 to 45,000 shut down per year. In 2019, 56,500 new businesses were set up, and 45,500 shut down.
Since the start of the crisis, there has been a 70% decline in the number of new businesses being set up, the data showed, due mainly to the uncertainty over developments on the ground due to virus-related restrictions.
“Business owners find it very difficult to make decisions in conditions of uncertainty, when there is no certainty for expected revenues and people expect cash flow management difficulties,” the report said. In addition, the high unemployment rate and lower consumption levels to which this could lead make it less attractive to open up a new business at this time.
The fashion industry, already suffering from competition with online sales, will suffer even more because of the coronavirus restrictions. More than 1,000 fashion stores are expected to exit the sector during 2020, the report said, a 33% increase over the number of shores that shut last year. In 2019, some 750 fashion stores closed, the report said.
In the bars, restaurants and coffee shops industry was already considered a risky business, with only 60 percent surviving beyond two years, and 66% closing or changing the way they operate within five years. Before the crisis there were some 11,500 bars and restaurants and food stalls, the report said. Some 3,000-3,500 restaurants open each year, while 2,500-3,000 restaurants close each year.
In 2020, because of the pandemic, there will be a 40% increase in the number of businesses that will shut down in this sector, with more than 4,000 restaurants and eateries expected to close, accompanied by a decline in the opening of new ones. The number of active businesses in the industry will thus contract this year by some 15%-20%, the report said.
In the real estate market, the report said, the coronavirus has created a shortage of some 50,000 workers, with Palestinian workers not allowed to enter Israel due to the lockdown, and a shortage of products like cement, aluminum and ceramic tiles. This has caused the construction industry to post a 50% decline in productivity, and is generating delays in the delivery and approval of new projects.
Because of the high levels of unemployment, which at the height at the crisis reached 27%, compared to 3.4% pre-coronavirus, consumers are more hesitant to buy homes. The industry entered the crisis with the demand for homes exceeding supply, the report said, and in the longer term this trend is set to continue, with demand rising again.