Closed shops in Palma, Mallorca

The loss of businesses has been greater in the services sector.

13-10-2020Teresa Ayuga

Last week's economic report from the Confederation of Balearic Business Associations indicated that there was the loss of 13% of businesses during the second quarter of this year. The CAEB believes that this is just a precursor of what will happen over the coming months, when economic activity is at a minimum.

Without sufficient income, some businesses will be going into hibernation. Others will call it a day. In coastal areas of the Balearics, there have been businesses - hotels, bars, restaurants, shops - which haven't opened at all this year.

The 13% decrease coincided with the lockdown and the phases of the de-escalation. Non-essential businesses had to close for much of this period. Nationally, the loss of businesses was lower - 9.5% - while in the Balearics there was higher loss in the service sector, 14.4%. The CAEB says that businesses were affected by the level of uncertainty and by the effectiveness (or not) of health and economic political policies.

The closure of non-essential businesses in the middle of March meant a halt to activity and therefore a reduction in income. As well as causing liquidity problems, profit forecasts were wrecked and so were plans for new projects. For the construction industry, work has been reduced because there isn't the investment in the tourism sector (hotels, restaurants, clubs, etc.) as there normally would be.

The confederation points to there not having been a recovery after the state of alarm ended in June, while the fall in tourism activity has been a major blow to businesses in the Balearics. With eyes now being turned towards 2021, the CAEB warns that the process of recovery will be very slow and that the effects of the crisis will be felt for a long time.

Despite the ERTE extension, the confederation is forecasting that the rate of unemployment will exceed 20%. This will be as a consequence of the destruction of part of the islands' productive framework.

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