By Emily Jerkins, BBA Director of Research
The impact of the COVID-19 pandemic has been immediate and dire for Birmingham area businesses. That’s what companies reported in a recent economic impact survey conducted by the Birmingham Business Alliance (BBA) and the Birmingham Regional Economic Development Alliance, a partnership of economic developers across the seven-county region.
Launched in mid-March, the survey results have guided the work of the BBA and its allies over the last six weeks, revealing what support and resources are needed most and where. With an impressive amount of regional cooperation, more than 260 companies from a wide variety of locations, sizes and industries provided an outlook for their businesses, during and after the pandemic.
While bleak now, experts say Birmingham faces less economic risk compared to other metros across the nation. Chmura Economics said our region’s economy is slightly less vulnerable than other metros, ranking Birmingham No. 208 out of 384 metros. Brookings ranked the region No. 173 among 382 U.S. metros based on the percent of at-risk jobs – nearly 16 percent of the job market or 75,000 jobs are at-risk in our metro.
But concerns around high unemployment, layoffs, furloughs, cash flow, business continuity and the disproportionate impact on minority- and women-owned businesses persist and will continue to guide the work of the BBA and its allies in the months ahead.
Here are some key takeaways from the BBA’s survey, conducted throughout March and April:
The economic impact is immediate and dire. Nine out of 10 businesses indicated a decrease or expected decrease in business. Interestingly, both small businesses (less than 50 employees) and large businesses (over 250 employees) indicated similar levels of business decline (93 percent indicated a decrease in business), compared to 77 percent of midsize employers (5o to 250 employees).
Four out of 10 businesses indicated potential layoffs. Overall, 28 percent of business respondents indicated likely layoffs for a combined 2,800-plus disclosed layoffs. The automotive industry represented 40 percent of disclosed layoffs.
Seven out of 10 businesses indicated a revenue loss of 10 percent or more. 34 percent of small business respondents lost more than 75 percent of revenue since March 1 compared to an estimated 20 percent of larger employers (50 or more employees). Similarly, and as expected, respondents from local businesses, such as restaurants, experienced drastic revenue decreases (75 percent or more) at nearly twice the rate of traded sector business respondents (23 percent).
Nearly half of small business respondents cannot operate more than 30 days without new sales, highlighting how crucial immediate access to financial relief is for small businesses.
Comparatively, half of larger business (50+ employees) respondents indicated they were able to operate over 60 days without new sales. While these businesses have more of a cash buffer, they are still facing financial pressures. Sixteen percent of layoffs were from larger business respondents with a cash buffer of 60 days or more.
Minority-, women- and disadvantaged-owned (MWDBE) businesses, representing 42 percent of respondents, have been disproportionately impacted by COVID-19. Fifty-two percent of MWDBE-owned business respondents experienced a revenue loss of 75 percent or more since March 1 – nearly three times more than the percent of non-MWDBE-owned businesses experiencing similar levels of revenue loss. From a layoff perspective, five out of 10 respondents indicated potential layoffs, compared to an estimated three out of 10 non-MWDBE-owned. From a cash buffer perspective, 65 percent of MWDBE-owned business respondents had less than a 30-day cash buffer, more than double the percent of non-MWDBE-owned business respondents.
With the temporary shutdown of both Mercedes and Honda, the region has faced substantial layoffs among its automotive manufacturers. Automotive manufacturers represented more than four out of 10 potential layoffs indicated in the assessment for a total of 1,200-plus estimated layoffs. Across the state, transportation equipment manufacturers represented 10 percent of initial and continued unemployment insurance claims for the week ending April 25. This is an underestimate of actual impact since many of the initial layoffs were among contract workers. Central Alabama is home to an estimated 28 percent of transportation equipment manufacturing jobs.
Unsurprisingly, financial aspects of their business – working capital, payroll, overhead, etc. – and business continuity were the most pressing concerns of respondents.
When asked about the most relevant areas of support, these areas were the most frequently cited: Enhanced economic efforts to support local businesses, work with banks/lending institutions to offer flexible loan options, assistance with SBA disaster relief loan applications, provide resources to employees that will get laid off and relief from local taxes.
The most pressing concerns and relevant support did somewhat vary based on the size of the employer. Small employers were more concerned about their lease and other financial relief compared to other employer groups. Employee absenteeism and retention represented more of a concern for midsize employers than other groups and the most relevant support cited was resources for employees who must self-isolate. Access to raw materials and supplies also represented higher concern for this group of employers, which are predominately traded, manufacturing businesses. Many of the employers in this group are considered essential and have continued operating. More than other segments, large employers cited assistance with unemployment claims and resources for employees who have been laid off as the most relevant support. Financial debt relief also rose to the top five for large employers, likely reflecting how record levels of corporate debt prior to COVID-19 are putting additional financial pressures on businesses.
Amid overall economic decline, some businesses are experiencing an increase in business. Five percent of overall respondents and 17 percent of midsize employers, predominately food and beverage related operations and in-demand business services, indicated an increase in business.
The BBA will continue to monitor the pandemic’s impact on local businesses and report out to the public frequently. You can see our updates to the community and our Investors here and find business resources here.
We are encouraging all our investors and the business community to participate in the Alabama Business Confidence Index, conducted by the University of Alabama’s Center for Business and Economic Research, which is taken by businesses statewide and can provide economic expectations on the quarter ahead.