More Than Half of Small Business Owners Say "This Year's Business Environment Will Be More Difficult Than Last Year"

More than half of small business owners expect "this year's business environment to be more difficult than last year."

The scene around Jongno, Seoul, on the afternoon of the 15th of last month. Photo by Yonhap News

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The Korea Federation of SMEs announced the results of the "Small Business Management Status and Policy Task Survey" containing this information on the 8th. This survey was conducted from November 12 to December 6 last year, targeting 800 small business owners in life-related industries (retail and wholesale, lodging and restaurants) and manufacturing industries.

95.0% of small business owners anticipated that this year's business environment would either worsen (55.6%) or remain similar (39.4%) compared to last year. Positive outlooks accounted for only 5.0%.

The biggest business burden factor this year (multiple responses allowed) was high prices such as rising raw material and supply costs at 52.8%. This was followed by sales decline due to domestic demand slump (43.1%), loan repayment burden (36.4%), and rising labor costs and difficulties in securing manpower (35.5%).

However, 93.5% of small business owners responded that they are "not considering business closure." The Federation of SMEs explained, "This is analyzed to be due to livelihood-type startups accounting for 78.5% of the total, driven by difficulties in employment and preparation for old age."

24.6% of small business owners were utilizing online platforms. By industry, lodging and restaurants showed a relatively higher dependence on online platforms at 40.0%, compared to retail and wholesale (15.7%) and manufacturing (15.0%).

The proportion of sales through online platforms out of total sales was on average 35.4%. The shorter the business period, the higher the usage rate and sales proportion through online platforms, confirming that measures to reduce the burden of online platforms are necessary for stable business operations of startup small business owners.

Regarding financial institution loans, 73.8% of small business owners borrowed for business purposes, and 34.9% responded that their loan amounts increased compared to the previous year. Among small business owners with loans, 93.7% (61.0% very burdened, 32.7% somewhat burdened) felt burdened by principal and interest repayments and interest payments.

The most needed support policies for small business owners in the field were surveyed in order as "financial support" (80.8%), "market access support" (9.9%), "fostering entrepreneurial small business owners" (2.4%), and "spreading a culture of win-win cooperation" (1.9%).

The top priority tasks to be addressed by the National Assembly or government this year (multiple responses allowed) were "alleviating loan burdens caused by high interest rates" (63.4%), "resolving rising labor costs and manpower shortages" (63.0%), "expanding income deduction benefits for small business owners" (29.6%), and "reducing energy cost burdens" (28.3%).

Choo Moon-gap, head of the Economic Policy Headquarters at the Korea Federation of SMEs, said, "Following the complex economic crisis of high exchange rates, high prices, and high interest rates, consumption contraction due to political instability is prolonging," adding, "To resolve the difficulties of small business owners who are absolutely dependent on domestic demand, policies to revitalize domestic consumption and reduce interest rates for small business owners are urgently needed."

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