The first wave of sickness from the coronavirus pandemic seems to be waning in Israel, but businesses and their workers are likely to suffer the fallout for a long time to come.
Up to 70,000 businesses in Israel are forecast to close by the end of the year, a 50% increase from 2019, according to a review by Dun & Bradstreet conducted on behalf of TheMarker.
Given that fewer new businesses are likely to open as well, amid the current atmosphere of economic uncertainty, Israel is forecast to finish the year with 30,000 fewer businesses, a 5% drop in total.
As such, the likelihood that any given business in Israel will close this year has increased to 11%, up from 7.5% in 2019.
This year is likely to be the first year in a decade in which the number of businesses in Israel contracts. Last year, Israel gained 11,000 businesses, after taking into account both those that were launched and shuttered.
In previous years, an average of 55,000 businesses opened each year, versus 40,000-45,000 that closed.
Since the pandemic struck, there has been a 70% decrease in new businesses being registered. After some correction in the second half of the year, the survey predicts that new business openings will contract some 33% in total.
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“It’s very difficult for businesses to make business decisions given the current uncertainty, when there’s no forecast for incoming revenue and managing revenue streams is likely to be difficult. Given the current unemployment rate [which hit an unprecedented 30%], the public’s purchasing power has shrunk, and this makes it less worthwhile to launch a business right now,” said Efrat Segev, chief of data and analytics at Dun and Bradstreet.
The businesses likely to be hardest hit are those in the weakest financial state, or in industries with the most risk.
The most closures are likely to come in industries that even in good times are considered risky.
Among others, Dun and Bradstreet forecasts that more than 1,000 clothing stores are likely to go under in 2020, a 33% increase from last year. Last week, the Razili chain closed its 10 shops.
Israel’s fashion industry entered the crisis in particularly precarious shape. The industry has been losing sales for two years as customers shift their shopping to online orders and to foreign shops while on vacation, and the large amount of sales space has resulted in lower sales per meter. The government-imposed restrictions to halt the spread of the coronavirus first shuttered stores in mid-March, and later storefronts, and as a result, the industry’s operations were largely halted beginning in mid-March.
Israel’s large chains, including some clothing chains, pushed the government for a 6-billion-shekel bailout.
Another industry likely to be hard hit is restaurants, coffee shops and bars: Some 4,000 of them are expected to close over the course of the year. Even in good times, this industry is a risky one; only 60% of businesses survive more than two years. The number of these businesses closing this year is likely to be 40% more than in an average year, and the total number of businesses in the field is forecast to contract by 15%-20%.
Israel’s restaurants are currently offering takeout and deliveries, but are forbidden from seating customers.
The real estate industry also has large exposure to the coronavirus crisis, even though construction never stopped with the rest of the economy. Some 2,000 developers in Israel, mostly of homes but also of offices, recently halted operations due to financing problems, states the report. In addition, some 500 projects are offering sales at discounts of 15% off the market price, says Segev.