As we aim to optimise the strength of the economic recovery from the COVID-19 crisis, the attention of governments worldwide is turning towards small and medium-sized enterprises (SMEs) and entrepreneurs, and how best to help maximise their contribution to stronger, sustainable, cleaner, more inclusive growth.

Small and medium-sized enterprises (SMEs) and entrepreneurs have been at the epicentre of the COVID-19 pandemic. In those sectors most exposed to containment measures, SMEs were disproportionally represented, and, in turn, disproportionally impacted. With limited cash reserves to survive lockdowns and drops in sales, the crisis represented an existential risk to millions of SMEs and entrepreneurs. The unprecedented speed and scale of government support has however avoided that risk turning into a reality.

Restrictions to mobility, trade and activities taken to contain the COVID-19 pandemic triggered the most severe global recession in the post-war period. All firms and sectors were, directly or indirectly, affected, but small and medium-sized enterprises (SMEs) were hit particularly hard. Overrepresented in the most exposed sectors (e.g. food and accommodation services), they often had to close operations. Among those that were able to continue operations, many saw significant falls in revenue and faced severe liquidity shortages as a result. According to the Facebook/ OECD/ World Bank Future of Business Survey, among SMEs that remained open from May to December 2020, between 55-70% saw sales fall, with two thirds experiencing falls of more than 40%.

The restrictions imposed to contain the COVID-19 pandemic triggered the most severe global recession in the post-war period. The majority of small and medium-sized enterprises (SMEs) either had to close operations or faced significant falls in revenue. Even though the adoption of digital technologies is more difficult for smaller firms, online sales helped to contain reductions in revenue for a number of SMEs. In addition, policy responses were quick and strong overall and they largely contributed to avoid a wave of bankruptcies so far. SMEs in the sectors most impacted by lockdown measures and those with significant reductions in sales disproportionately benefitted from government support within countries. Nevertheless, there have been difficulties in reaching the self-employed, smaller and younger firms, and women and minority entrepreneurs. There are also significant cross-country differences in the proportion of SMEs receiving government support, in part reflecting institutional settings, effectiveness of delivery mechanisms and fiscal capacity. At the end of 2020, a large proportion of SMEs continued to express the need for additional support in the future, especially in countries with strict containment measures in place. Looking ahead, as the economic situation progressively normalises and support measures are unwound, governments will need to ensure that debt does not endanger viable firms, and that resources are reallocated from non-viable businesses.