Small Business Operating Profit Plummeted 43% Due to COVID Bomb... Debt Piles Up to 48 Trillion Won

Statistics Korea Announces Results of Small Business Survey

[Sejong=Asia Economy Reporter Kim Hyunjung] Due to the spread of COVID-19 and the government's social distancing quarantine guidelines making normal business operations difficult, last year domestic small business owners saw their operating profits plummet by 43%, while their debts increased by nearly 20%. The number of workers also decreased by more than 870,000, showing a contraction in the market itself.

According to the "2020 Small Business Survey Results (Provisional)" released by Statistics Korea on the 28th, last year the average sales per small business decreased by 11 million KRW (4.5%) from the previous year to 224 million KRW, and operating profit sharply dropped by 43.1% (14 million KRW) during the same period to 19 million KRW.

◆ Small business owners burdened with 48 trillion KRW debt amid halved profits = In this survey, which has been compiled since the 2018 baseline, sales and operating profits decreased by 0.2% and 3% respectively from 2018 to 2019. A Statistics Korea official explained, "A decline in profits was already observed the previous year," adding, "This year, the spread of COVID-19 is considered to have had an impact."

Small business sales increased in repair and other service industries (0.9%) but sharply declined in manufacturing (-12.2%), arts, sports, and leisure (-11.9%), among others. Operating profits significantly decreased in arts, sports, and leisure (-85.2%), education services (-66.4%), and accommodation and food services (-56.8%).

As the business environment worsened, debts also increased. The proportion of businesses holding debt rose by 8.1 percentage points from the previous year to 60%. Debt per business was 169 million KRW, down 1.4% from last year. Total debt surged by 19.3% year-on-year to 47.7 trillion KRW.

◆ Number of businesses increased... number of workers down by 870,000 = The number of businesses rose by 4.7% (131,000 businesses) from the previous year to 2.902 million, while the number of workers decreased by 13.5% (871,000 people) to 5.573 million. In 2019, the number of businesses increased by 1.1% and the number of workers increased by 1.9% compared to the previous year.

The number of businesses increased in accommodation and food services (7.5%) and manufacturing (3.7%), and by region, increased in Sejong (12.6%) and Gyeonggi (7.4%). Based on the number of workers, arts, sports, and leisure (-20.5%) and wholesale and retail (-16.7%) saw large declines, while by region, Gwangju (-15.8%) and Ulsan (-15.2%) experienced decreases.

The average startup preparation period per business decreased by 0.5 months from the previous year to 9.7 months, and startup costs decreased by 11.9% to 90 million KRW. By preparation period, those under 3 months (up 1.5 percentage points) and 3 to under 6 months (up 1.3 percentage points) increased, while 12 to under 24 months (-1.6 percentage points), 6 to under 12 months (-0.5 percentage points), and over 24 months (-0.5 percentage points) decreased. Startup costs showed a declining trend in wholesale and retail (-20.1%), manufacturing (-12.7%), and accommodation and food services (-6.7%).

◆ 80.5% of small business owners are tenants... monthly rent increased, jeonse and free rent decreased = In terms of rent, the burden on small business owners appears to have increased. The proportion of owner-occupied properties decreased by 1.2 percentage points from 20.7% in 2019 to 19.5% in 2020, and 80.5% operated their businesses in leased spaces last year.

Among rents per business, monthly rent with deposit increased by 0.5 percentage points from the previous year to 85.9%, while jeonse (key money deposit lease) and free rent decreased by 0.3 percentage points and 0.2 percentage points to 2.2% and 3.6%, respectively.

Other management difficulties cited by small business owners included intensified competition (38.3%), decline of commercial districts (37.6%), and raw material costs (28.7%). Policies needed to respond to disasters such as COVID-19 were identified as subsidy support (67.7%), expanded loans (33.0%), and social insurance fee relief (21.4%).

This content was produced with the assistance of AI translation services.