Natalia Zubarevich: 'Small and medium-sized businesses will die by the summer'
Experts predict an increase in bankruptcies, as after the crisis of 2008 — only big players will survive
Tatarstan has lost more than 3,500 companies by the results of the pandemic year. But experts predict an even greater decline in the market by the summer: businesses now have to pay deferred rent and tax payments, debtors will begin to close en masse. However, not only the coronacrisis is to blame, the trend for a sharp reduction in the number of SME participants has been observed over the past five years — their number has fallen to 90,000 (-20%). Read the details in the material of Realnoe Vremya.
Minus 3.5k enterprises
In the context of the coronavirus pandemic, Tatarstan lost more than 3,500 companies over the past year. The lion's share of closures fell on firms that worked in the areas of trade and car repair (1,800), now there are about 28,000. Behind every “gone” businesses, there are the employees who lost their jobs, and the owners' losses.
The number of organisations specialising in scientific and technical activities decreased by 554 firms — to 9,000. Among the owners of manufacturing industries (-383 units, or -4,1%), the losses are even higher than among hoteliers and restaurateurs (-68 units, or -3,2%): the first is now 8,800 , the second — 2,000. The number of companies engaged in the field of culture, sports, leisure and entertainment has not changed much — there are still about 2,000 of them.
The number of firms for administrative activities and related services decreased by 5%, or 215 organisations (from 4,332 units to 4,117 units). The number of real estate agencies decreased by about the same amount (202 units) (from 7,428 units to 7,226 units).
But in construction, on the contrary, there was an increase (+321 units) — up to 15,000. During the lockdown, construction projects continued to work, in addition, the housing market was spurred by low mortgage rates.
“SMEs were supported very poorly, those who survived survived”
According to the director of the Strategicheskoye Resheniye company, Marat Kadyrov, the pandemic has hit the private sector and the service sector hard. Russian businesses got used to living in conditions of uncertainty, and first of all, the coronacrisis led to the freezing of investments and the postponement of strategic plans. Profits fell very much, sales volumes and the solvency of the population decreased.
A similar opinion was expressed by Russian economist-geographer, Professor of the Department of Economic and Social Geography of the Department of Geography of Moscow State University Natalia Zubarevich.
“All tax payments are deferred, rent is deferred. Now businesses will have to pay deferred taxes. I don't see any possibility of a quick recovery yet. Besides, SMEs were supported very poorly. Demand has fallen. Who survived — those survived. Small and medium-sized businesses will most likely die by the summer.”
Depressing five-year plan
However, one can't blame only the coronacrisis. If over the past year the number of companies decreased by 3,500 and reached 105,900, then in previous years, there was the same trend of a sharp decline in the number of enterprises.
For example, over the past five years, the number of organisations has decreased from 113,000 to 90,000 (-20%), that is, over this time, the Tatarstan market has lost one-fifth of all companies. Marat Kadyrov sees the reason in the general stagnation of the economy. GDP stagnated during this period, and one or another growth was provided at the expense of public spending. The funds that were used in private organisations decreased. The volume of investments also decreased.
“Private investors, owners of private companies have found it increasingly difficult to earn money, and business margins are shrinking. Risks are only growing, as the state is drawing the entire economy upon itself, introducing new methods of regulation. In fact, all these years, the market has been re-divided in favour of state-owned companies and state corporations," the expert believes.
The second factor Kadyrov called is tax policy. In recent years, VAT has increased, and deductions from the payroll fund have not decreased as expected. This has made it harder to earn money in the private sector. The coronacrisis has only worsened the already difficult situation.
According to Natalia Zubarevich, employment in small and medium-sized businesses in the country from 2017 to the first quarter of 2020 inclusive decreased by one million people, or by 9%.
“The income of the population is falling, there are more and more 'inspectors', the institutional environment is getting worse," the MSU professor concluded.
Among the sectors of the economy for which demand has increased, Marat Kadyrov highlighted online trade, logistics and transport services, and IT sector. But it is difficult to compete because the base is low, he said.
“Now, as after the 2008 crisis, many large and medium-sized companies will go bankrupt due to the volume of liabilities. Moreover, there will be a redistribution in favour of the banking sector, and in the future, there will be a consolidation of the market. Only big players will survive. Small players will appear, but the volatility in the market will encourage short deals. Everything in our country still depends on the state, since there are very few competitive mechanisms in the economy," Kadyrov concluded.