Every day, 215 businesses permanently close their doors in Spain

by Lorraine Williamson
as more businesses close, others open
ASSSA

MADRID – The self-employed sector most affected in Spain is the retail sector. In 2022, 19,000 retail businesses will close their doors. In January already this year, the curtain finally fell for 6,700 independent entrepreneurs. 

The increase in social security contributions, the increase in the Minimum Interprofessional Wage (SMI) approved on Tuesday, the increase in energy costs (supplies and transport) and raw materials, as well as the decrease in turnover due to the impact of inflation in consumption, means the outlook for many self-employed people in the country has turned very dark. 

The biggest loss in trading 

The year 2022 ended with a balance of only 5 self-employed persons. This means that the company closures that took place last year were offset by the creation of new companies. At the end of December, Spain had 3,328,402 self-employed people. However, in some sectors, the balance was very negative. Commerce suffered the biggest loss last year at 18,988 self-employed, followed by hospitality (-3,214), agriculture (-2,842) and manufacturing (-2,576), according to data from the social security. 

These closures were offset by more new businesses in professional, scientific and technical activities (+7,063), health and social services (+4,530) and construction (+3,999). 

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This year got off to a bad start with the loss of 20,800 self-employed people in one month. It was particularly bad in sectors that were already in a delicate situation: 6,681 more business closures, 2,816 in the hospitality industry and 1,499 in the manufacturing industry. In addition, 2,286 self-employed persons in construction and 1,875 in professional, scientific and technical activities disappeared. 

Retail big loser 

Commerce is the big loser of self-employment, both in 2022 and this year so far. Last year, on average, 52 businesses closed per day. In January alone, there were 215 daily closures. According to Lorenzo Amor, president of the self-employed association ATA, self-employment in an economy acts as a leading indicator. It shows in advance how employment in the country as a whole will behave in a few months. 

Less access to bank credit 

The economic situation has a lot to do with this evolution. In addition to the cost increases mentioned above, the self-employed have also suffered from the tightening of financing conditions: less access to bank credit and more expensive. 

According to the latest ATA Barometer, 95.2% of the self-employed in the country will have experienced an increase in costs by 2022. For 48.4% of the companies, this increase is between 10-20%; for 13.6% between 20-30%; for 10.5% between 30-50% and 4.6% of the total had to do with a price increase of more than 50%. 

Related post: Tax authorities pay extra attention to self-employed people from these sectors 

However, since the European Central Bank raised interest rates to contain inflation, the tightening of financing conditions has had a major impact on companies and individuals in the country. In 2022, given the increase in the cost of borrowing, 58.4% of the self-employed did not apply for bank financing (a very common way for this group to obtain liquidity), half because “they can no longer borrow”. 

Although many self-employed people have not applied for new credit, many outstanding loans are affected by the rate increase. Therefore, 42.2% of self-employed admit that the increase affects them “quite a bit” or “a lot” in their bills. 

Less solvent businesses close

Due to their small size, many entrepreneurs also have less resistance to the impact of the economic situation than large companies. They have fewer savings, the less financial capacity to access credit, fewer invoices to absorb a drop in sales, and less solvency. 

The increase in costs may also be exacerbated for them by the changes in the social contributions that the self-employed must pay each month to the Social Security. The amount of the contribution is now based on real income. In a net income table divided into 15 sections, each section has a different quota. These quotas will be adjusted step by step until 2025. The new classification should mean that the more an entrepreneur earns, the more he or she contributes. 

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