The impact of a government shutdown on small business is a matter of significant concern, as revealed in a recent survey conducted by Goldman Sachs. Here are some key takeaways from the survey and why it matters:
Government Shutdown:
- Negative Impact on Small Businesses: According to the survey, 91% of small business owners strongly favor avoiding a government shutdown. Many small business owners find the mere prospect of a government shutdown "unbelievably stressful."
- Anticipated Impact: Of those surveyed, 70% believed their businesses would be negatively impacted if a government shutdown were to occur.
- Revenue Concerns: A staggering 93% of business owners were concerned their revenue would suffer as a result of a government shutdown.
The survey highlights the critical role that small businesses play in the U.S. economy, underscoring the challenges they face during periods of government uncertainty. Small businesses are vital employers and economic contributors. Their concerns about the potential impact of a government shutdown warrant attention and consideration from policymakers.
What else should small business owners know about a pending shutdown?
Context:
Analysts from investment management firm PIMCO predict a government shutdown at the end of the month, or by October 1, 2023. Tense messaging from GOP House leadership and President Biden’s office indicate that Washington is taking measures to prepare for a shutdown. Still, experts at Loan Mantra believe the strength of the capital markets is a positive indicator that a resolution may be within the reach of the deadline.
While a government shutdown doesn’t pose the same kind of risks to the market and economy as a debt default, which was of concern earlier this year, it’s still a shock. Small businesses are particularly vulnerable during shutdown periods because they have lesser financial cushion as compared to large corporations.
More importantly, small business borrowers are up against tighter borrowing conditions, particularly during government shutdown. This makes it harder for them to secure additional financial reserves.
Small Business Perspectives:
As with any economic uncertainty–from government shutdown to global pandemic–here's why small businesses deserve attention and consideration from policymakers:
1. Significant Employment: Small businesses are responsible for employing close to half of all U.S. private sector workers. They are a primary source of livelihood for millions of Americans.
2. Economic Contribution: Small businesses are crucial contributors to the nation's economic health. They drive economic growth, foster innovation, and promote local development in communities across the country.
3. Vulnerability: Small businesses are often more vulnerable to economic shocks, such as a government shutdown or financial crisis, due to their limited financial reserves and resources.
4. Job Security: The well-being of employees working in small businesses is closely tied to the success and stability of these businesses. Job security for a substantial portion of the workforce depends on the health of Main Street.
5. Supply Chain Impact: Small businesses are part of complex supply chains, and disruptions in their operations can ripple through the broader economy, affecting larger corporations and industries. One major example of this ripple effect is when a government shutdown impacts transportation.
6. Community Impact: Small businesses play an essential role in building and sustaining vibrant local communities. Their success directly impacts the quality of life in neighborhoods and towns nationwide. Political and governmental disruption can impact the ongoing health of a community.
Given the vital role that small businesses play, policymakers should be attentive to their concerns and responsive to their needs. Supporting small businesses during times of government uncertainty can help preserve jobs, stimulate economic recovery, and strengthen the overall resilience of the U.S. economy.