"One in Three Self-Employed Consider Closing Business"... Difficult Second Half Expected

Considering Closure Due to Performance Decline (32.4%)

[Image source=Yonhap News]

[Asia Economy Reporter Park Sun-mi] As the triple crisis of high inflation, high interest rates, and high exchange rates is compounded by the resurgence of COVID-19, concerns are growing over the continued business difficulties in the second half of the year, with 33.0% of small business owners in local commercial districts considering closure.

On the 31st, the Federation of Korean Industries commissioned market research firm Mono Research to conduct a survey of 500 self-employed individuals on their "2022 First Half Performance and Second Half Outlook." The results showed that sales in the first half of this year decreased by an average of 13.3% compared to the same period last year, and 70.6% of self-employed individuals experienced a decline in sales.

59.0% of self-employed respondents forecast that sales in the second half of this year will also decline compared to last year, with an average decrease of 7.8%. Although 20.8% of self-employed individuals expected a slight sales increase within 0-10% in the second half, 9.8% anticipated a 40-50% decrease, and 9.0% expected a 30-40% decrease, meaning that 20.8% foresee sales dropping by more than 30% compared to the same period last year.

33.0% of self-employed individuals stated they are considering business closure. The reasons for considering closure included decreased business performance (32.4%), burden of fixed costs such as rent and labor costs (16.2%), worsening financial conditions and loan repayment burdens (14.2%), and management burdens (12.1%).

On the other hand, reasons for not considering closure included "no particular alternative" (22.7%) and "expectation of economic recovery after the end of COVID-19" (20.1%), followed by "business performance is not bad" (14.9%), "business is sluggish but financial burden is not heavy" (13.3%), and "entering new businesses or changing industries is expected to be riskier" (12.4%).

The most burdensome management cost for business owners was rent, including deposits and monthly rent (28.4%), followed by raw material costs (20.0%), labor costs including wages and social insurance (19.6%), and loan repayments including principal and interest (16.0%).

The biggest anticipated difficulty this year was "the burden of purchasing materials due to rising prices" (23.6%). Other difficulties included rising rent and tax burdens (17.2%), loan repayment burdens due to rising interest rates and maturity (14.8%), and limited recovery of overall consumer sentiment due to concerns over the resurgence of COVID-19 (10.5%).

To revitalize local commercial districts, self-employed individuals most frequently cited the need for "expanded support measures to stimulate consumption" (16.1%). There were also responses hoping for expanded financial support such as low-interest loans (15.5%), suppression or reduction of public utility fee increases such as electricity and gas (14.3%), and expanded funding support (10.4%).

Yoo Hwan-ik, head of the Industry Division at the Federation of Korean Industries, pointed out, "Considering that this survey was conducted at the early stage of the COVID-19 resurgence with the Omicron subvariants, the outlook for the second half of the year felt by self-employed individuals is likely worse than the survey results. As the so-called triple crisis of high inflation, high interest rates, and high exchange rates increases the burden on self-employed individuals, support measures that minimize their burdens, such as improving consumer sentiment, expanding financial support, and offering discounts or support for public utility fees, are necessary."

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