STATE AG CALLS FOR FEDERAL PROBE INTO FRONTIER ACTIONS
The United States faces a wave of small- business failures this fall if the federal government does not provide a new round of financial assistance — a prospect that economists warn would prolong the recession, slow the recovery and perhaps enduringly reshape the American business landscape.
As the pandemic drags on, it is threatening even well- established businesses that were financially healthy before the crisis. If they shut down or are severely weakened, it could accelerate corporate consolidation and the dominance of the biggest companies.
Tens of thousands of restaurants, bars, retailers and other small businesses have already closed. But many more have survived, buoyed in part by billions of dollars in government assistance to both businesses and their customers.
The Paycheck Protection Program provided hundreds of billions in loans and grants to help businesses retain employees and meet other obligations. Billions more went to the unemployed, in a $ 600 weekly supplement to state jobless benefits, and to many households, through a $ 1,200 tax rebate — money available to spend at local stores and restaurants.
Now that aid is largely gone, even as the economic recovery that took hold in the spring is
losing momentum. The fall will bring new challenges: Colder weather will curtail outdoor dining and other weather- dependent adaptations that helped businesses hang on in much of the country, and epidemiologists warn that the winter could bring a surge in coronavirus cases.
As a result, many businesses face a stark choice: Do they try to hold on through a winter that could bring new shutdowns and restrictions, with no guarantee that sales will bounce back in the spring? Or do they cut their losses while they have something to salvage?
For the Cheers Replica bar in Faneuil Hall in Boston, the answer was to throw in the towel after nearly two decades in business.
“We just came to the conclusion, if we’re losing that much money in the summertime, what’s the winter going to look like?” said Markus Ripperger, president and chief executive of Hampshire House, the bar’s parent company.
Many businesses that failed in the early weeks of the pandemic were already struggling, had owners nearing retirement or were otherwise likely to shut down in the next couple of years. Those closing down now look different.
Cheers was a longstanding, successful business with access to capital and owners willing to invest to keep it going. But the bar, built to resemble the one on the 1980s sitcom, depended heavily on tourist traffic that collapsed during the pandemic.
On Friday, the Commerce Department reported that consumer spending rose only modestly in July after two months of resurgence and remained below pre- pandemic levels. Economists warn that without the $ 600 a week in extra unemployment insurance, spending is likely to slow further this fall.
Data from Homebase, which provides time- management software to small businesses, shows that roughly 20% of businesses that were open in January are closed either temporarily or permanently. The number of hours worked — a rough proxy for revenues — is down by even more during what should be the year’s busiest period. Both figures have stalled or turned down in recent weeks.
Small business owners have grown more pessimistic as the pandemic has dragged on. In late April, about a third of small businesses surveyed by the Census Bureau said they expected it to take more than six months for business to return to normal. Four months later, nearly half say so, and a further 7.5% say they do not expect business ever to bounce back fully. About 5% say they expect to close permanently in the next six months.