Entrepreneurs in the regions prepare for bankruptcy: fear another quarantine

Great difficulties will appear after the quarantine.

Vaidas Lankauskas, President of the Utena Branch of the Lithuanian Small Business and Merchants Association Delphi says that after the first wave of the pandemic and the first quarantine in Utena, a large number of empty premises appeared, and the situation after this quarantine will depend on how long the quarantine measures last. However, in his opinion, the current business situation in Utena is worse than during the first quarantine.

“The store has been closed since mid-December, but service companies like sports clubs have been closed for a long time. The situation is very complicated. They did not recover from the previous quarantine and did not accumulate financial reserves. What does summer mean for a sports club? This is not the best and most lucrative period when they have been open. It is now closed again as of November. They will probably be closed for a longer time, the situation will be really sad, especially for the regions, ”says V. Lankauskas.

The small business representative has no doubt that there will be more corporate bankruptcies this year: “The largest companies are still running, there were no bankruptcies. As for individual activities, the situation is very complicated. When all companies come out of quarantine, we’ll see the real picture: how many companies will be closed. If the company plans to expand, it will definitely survive, but there will also be bankruptcies and company closures. “

Irina Šeršniova, director of the Utena Business Information Center, says that fewer companies were registered last year than in previous years. According to data from the Center, there are currently about 700 business entities operating in Utena (UAB, AB, MB and individual companies). Last year, 74 new companies were opened in Utena, 17 were revised twice – 34 – companies closed

“On the one hand, it may be the impact of state support, because the companies felt the help and were in no rush to pay. On the other hand, the bankruptcy process has become more complicated and lengthy. We cannot see the exact number of bankruptcies. due to the impact of the pandemic, because the bankruptcy process is long, sometimes it takes years ”, comments I. Šeršniova.

The interviewee highlights that last year there were layoffs at Utena. She shared data from the Employment Service: Unemployment in Utena increased 9.3 percent during the year. at 15.6 percent, and on January 1. The number of beneficiaries of EUR 257 who participated in individual activities was 903.

However, he predicts that the business situation after the quarantine will be worse: “The reaction will be no. The business chain is leaving: the manufacturer receives orders from whoever requests them, in the same situation. Many components that depend on more than one company. The results will appear when the activity is to be resumed. It will not be easy for everyone to go back to what they were before the quarantine, there may be more layoffs. “

Asked about how the increase in MMA this year will contribute to the layoffs, the head of Utena VIC says before the quarantine that there is a tendency for local companies to automate processes and resign from jobs, the quarantine will aggravate the situation and force companies to reconsider some positions.

“It all depends on the prospects companies see after quarantine. If companies see orders coming back, they may not forgive. Firing a good employee and finding new ones later is not that easy, so no one has to be in a hurry to do so, unless they are forced to forgive, “says I. Šeršniova.

Increasing MMA will lead to more layoffs

At that point, bankruptcies will not be affected by the rise in MMA, and business closures will be compounded by more serious problems: lack of orders and working capital.

V. Lankauskas, representative of the Lithuanian Association of Small Entrepreneurs and Traders, assures that the issue of increasing MMA is always extremely sensitive for companies. It is much harder for small businesses to survive in regions by increasing the MMA or other tax base.

“One thing is the rise of MMA in the largest cities and municipalities of Lithuania and a completely different issue, when MMA emerges in Kupiškis, Utena, Zarasai, Ignalina, Biržai and so on. Any tax increase, an MMA or other form of tax increase, is the most difficult issue for the regions. The regions do not grow, unlike Vilnius, which attracts all investment, most financial flows, the regions remain crumbs. The number of people in the regions does not increase, it is good that the same number of people remains.

I understand that this must be done if the economy grows, productivity increases. At a time when many businesses are closing, when many are in the dark, in my opinion, these measures are a bit strange ”, comments V. Lankauskas.

Fears of a possible third quarantine

The interlocutor says he hears rumors that as MMA rises, some companies are considering laying off workers, but notes that the pandemic currently faces the most challenges. According to him, if the government’s plan does not work, a third quarantine could be announced in the country, which will bring even more difficulties to small businesses.

“The first quarantine was news for many, I don’t know, people were tense and scared. The second quarantine is a completely different small business, as in the first, it is closed. But if it is not clear what will happen after the second quarantine, how many companies, people with individual activities will survive if the central government plans do not work, and there will be a third quarantine, it will be cruelly difficult, “he says.

A representative of Utena’s small business hints that the pandemic and Brexi encouraged emigrants to return to Utena and start businesses. According to him, in a few years about 5 small emigrant companies were established here. Give several examples: the “Vanilla Sky” bakery, which opened 7 years ago, is still operating successfully. Over a year ago, the exclusive lion and sheep catering establishment was opened for migrants returning from Australia, but the pandemic reportedly caused difficulties.

I sold family business and returned to Australia

Utena Gintarė Šulskytė Delphi She briefly told him that for personal reasons she had sold the family business to her Australian husband at the end of December. The two are currently in charge of the last business with the new owner of the cafe and are preparing to travel back to Australia.

“It just came to our knowledge then. Before the pandemic, we planned to expand and move to Vilnius, but the husband had family matters and had to make a decision. All the circumstances have arisen whereby we decided to go now and sell the business.” He says.

It is true that he admits that the pandemic certainly contributed to this decision: “The pandemic really had an impact, because a lot of reorientation was needed. For example, the first wave of the pandemic was very terrible because we had to shut down completely. We adapt to the second with take out food. I don’t think there is a single company that has not been affected by the pandemic. “

The businesswoman says that the new manager of the cafe plans to continue with the work that he has begun: “How much will remain the same as on his own is another question. Now there are transfers, so it’s hard to tell. I imagine you can have an idea, and when you’re in business, those ideas can change 10 times more, depending on the circumstances. “

Plungė adapted entrepreneurs – open email. shops

However, not all regions face special difficulties in a pandemic. Aurelija Gedmintaitė, Director of the 23-member Plungė Small Business Association Delphi claims that there are currently no bankrupt companies in Plungė, as only one massage company closed during the first wave of the pandemic. Among the members of the associations are companies in the field of beauty, whose activities are currently not possible, but seem optimistic about the future. Other members, most of them open by email businesses, work and live quite well.

“Companies do not close, they have established collection points, many things have been opened by email. Trade and transfer of goods. Others work receiving orders. Who works with groceries, opened an email. Buys, takes food home, uses other alternatives ”, says A. Gedmintaitė.

Plungia residents often order products by phone and pick them up at the store: “The stores on Facebook advertise their assortment, they have published their numbers, which is most often communicated by phone. The buyer calls to ask if he has the merchandise, he agrees when it would be possible to come and pick it up, the seller takes him outside to see it ”.

When asked about the situation in Plungė with employees, he points out that during the vacation period, some companies took employees on vacation, others on downtime. The interviewee highlights that with the increase in MMA in the country, most companies will try to retain employees, although there may be layoffs.

“On the one hand, increasing employee salaries can be good, on the other hand, on the other hand, employers may have had to wait for all the restrictions: the small ones are forced to close and the big ones are working. Definitely , increasing MMA is not an advantage for you, especially taxes. Small businesses are forced to close, although they could control the flow of people with greater freedom, they would be safer in them than in large supermarkets. This is the biggest resentment of small entrepreneurs, they feel offended, ”says the representative of the small business from Plungė.

According to data from the Employment Service, unemployment in Plungė district in November last year reached 15.7 percent. There were 3,147 job seekers registered with the Employment Service.