Finance Minister Avigdor Lieberman said last week that 2021 had been Israel's best year in the 21st century in terms of economics. While 2021 did see some records set for exports, credit expenditures, profits for retail chains, and banks, when it comes to small and medium-sized businesses, things were much bleaker, a report from LAHAV, the Israel Chamber of Independent Organizations and Businesses for 2021 shows.
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According to initial assessments, 2021 saw 70,000 small and medium-sized businesses in Israel go under, while only 35,000 new ones opened.
The number of businesses that closed up shop in 2021 was much higher than the two previous years. In 2019 – before the COVID pandemic – 44,000 small and medium-sized businesses ceased operations, and in 2020, 38,000 small and medium-sized businesses in Israel closed. The relatively low number of closures in 2020 was due to government assistance that kept some of these businesses afloat through the onset of the pandemic and the ensuing lockdowns.
It should also be noted that a small percentage of businesses stopped trading but did not close their tax files so the owners could claim government assistance. When the money stopped, these owners closed up shop.
In addition, the high number of small businesses closing is deterring entrepreneurs from opening new businesses, which might explain why only 35,000 new businesses launched in 2021.
The research conducted by LAHAV economic consultant Dr. Roby Nathanson, also revealed that 86.4% of businesses survive their first year, about half make it to five years, and less than one-third are still in business 13 years after being opened.
Accountant Uri Beeri, chairman of the Elliot Group of Certified Public Accountants, said, "The figures that arise from the study should worry decision-makers. Small and medium-sized businesses are the motor that keeps the economy going, and as such they need special attention and major financial support to overcome the special difficulties of this time and allow their long-term survival, as well as the simultaneous growth of the economy.
"A glum figure this this about businesses closing shows that not enough has been done to help them. COVID is a very hard catalyst for closures, so we need to hurry up and look at tools we can use to help them when it comes to taxation, funding, human resources recruiting and costs, and municipal costs," Beeri said.
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