Bank of Spain
El impacto de la crisis del COVID-19 sobre la vulnerabilidad financiera de las empresas españolas

The impact of the Covid-19 crisis on Spanish companies' financial situation

According to Bank of Spain estimates, the COVID-19 crisis has increased the number of companies in a situation of financial vulnerability, although the exceptional measures adopted by the authorities (ICO guarantee lines, ERTES, moratoriums...) and the expected reactivation of activity have contributed to reduce the number of companies at risk of becoming unviable and the number of companies that will remain viable but struggle to repay their debts out of their expected future earnings (overindebted firms).

The main data and conclusions of the report would be the following:

  • The crisis would have significantly raised the liquidity needs of companies in 2020: 70% of Spanish companies would have presented liquidity needs during the crisis, 13 percentage points (pp) more compared to a scenario in which the pandemic had not occurred. The liquidity and capital buffers generated in recent years would have covered, at most, 44% of the shortfall in funds generated by the crisis.
  • The measures adopted by national and international authorities eased access to credit under favourable conditions, mitigating short-term liquidity risks substantially. In fact, according to the report, Spanish companies would have covered almost half of their liquidity needs through bank loans with maturities beyond 2020, of which more than 80% would be loans under public guarantee programs.
  • Significant increase in the number of companies in a situation of financial vulnerability due to the COVID-19 crisis.  Vulnerable companies meaning those with negative net equity or high levels of indebtedness, due to a sharp drop in company turnover, and therefore in their profitability levels:
    - The profitability of SMEs would have fallen by 5% on average in 2020, -35% in the most affected sectors. The percentage of companies in losses would have reached 55%, 24pp more than in 2019.
    - Although the Bank of Spain's projections for the period 2021-2023 anticipate a progressive decrease in these percentages, in line with the expected reactivation of activity, the report concludes that there will be "an increase of between 2 to 3 pp in the proportion of companies at risk of becoming unviable, due to  persistent losses through to 2023, while the proportion of those that will remain viable but struggle to repay their debts out of their expected future earnings (overindebted firms) would rise by between 3 pp and 4.7 pp".
    - The Bank of Spain estimates that the amount of unsustainable corporate debt would be between 9 billion euros and 18,6 billion euros, depending on the considered scenario, and most of it would be concentrated in the SME segment.

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