A leading industry group said in a new report that chronicles the impact of COVID-19 on New York City that up to a third of its 230,000 small businesses may never reopen.
The Partnership for New York City, a nonprofit that focuses on research, policy formulation, and issue advocacy, released its post-pandemic response plan Monday (pdf), assessing outbreak impacts and suggesting actions for recovery and survival in a “new normal.”
“One thing is clear: returning to the pre-COVID-19 status quo is not an option. We are at a crossroads,” wrote Natasha Avanessians and Kathryn Wylde, the authors of the study, which was produced with input from 14 top global consulting firms.
“The virus seems under control, but fears of a resurgence remain. More than 1.5 million residents of the metropolitan region are currently out of work; tens of thousands of small businesses are at risk,” they wrote, warning that the tensions unleashed by the pandemic could lead to chaos unless New Yorkers work together “for recovery and positive change.”
“The abrupt cessation of travel and tourism had a devastating impact on hospitality, retail, cultural, and entertainment venues, particularly the city’s 27,000 restaurants,” they pointed out in the study, arguing that New York City’s highly valued cultural, social, and entertainment assets will most likely stay at least partially closed until next year.
“It will be far more difficult to restart and repair the economy than it was to shut it down,” they said.
“As many as a third of the 230,000 small businesses that populate neighborhood commercial corridors may never reopen,” they predict, noting the unemployment rate in the metro region has skyrocketed to 18.3 percent, with as many as a million households struggling to feed their families and pay rent.
More than two out of every five vulnerable jobs in New York City are in small businesses that employ fewer than 100 employees, according to Avanessians and Wylde, who besides co-authoring the report serves as president and CEO of the organization. Also, most small businesses have less than three months’ worth of cash reserves, the study notes, citing borough chambers of commerce. This is roughly the entire length of NY Pause, as the state’s COVID-19 shutdown is known.
“That means that funds to restart, pay back rent, and buy inventory are exhausted, leaving tens of thousands of entrepreneurs at risk, particularly business owners of color,” Avanessians and Wylde wrote.
“We’re all in the same storm, but we’re certainly not in the same boat,” Citigroup CEO Michael Corbat is cited in the report, which shows the accommodation and food services sector as hardest-hit, followed by the arts, entertainment, recreation sector, with the transportation and warehousing industry not far behind.
A base case scenario, which the report calls “Plausible & Pessimistic,” expects revenue projections in the accommodation and food services industry to fall by 38 percent in 2020 compared to 2019 and by 43 percent in 2021 compared to 2019. A less optimistic scenario, which is labeled as “Frequent, Blunt Lockdowns,” sees the 2021 revenue projections in this sector falling by 53 percent relative to 2019.
The biggest challenge to business owners, according to Avanessians and Wylde, are high rents, regulatory burdens, and taxes.
They said any recovery would have to be based on solid health measures in place to deal with a resurgence, including a robust testing and tracing program.
“This is a health crisis. We have to focus on the health issues first. The faster we heal, the faster domestic and international tourists will feel comfortable returning to our great city, which will help boost our economy and revitalize our local businesses,” according to Ajay Banga, Mastercard CEO, who is cited in the report.
Other action points include greater capital access and technical assistance for small businesses, as well as transforming New York into a “global Ed Tech hub” by helping the public education system transition into a model of blended classroom and online learning.
Avanessians and Wylde also call for the formation of a job council that would work with schools and colleges to produce more job-ready graduates, and urge holding “problem-solving sessions among diverse leaders to build consensus on issues such as transit, security and criminal justice, racial justice, community development, and tax and regulatory reform.”