The business sector is absorbing the costs of the war. Dun & Bradstreet data reveals a 51% spike in the number of companies and businesses whose business credit ratings indicate cash flow difficulties. Independent businesses suffered the most, as the cash flow risk jumped to 120%, three times compared to the corresponding period in 2023.
This increase, according to Dun & Bradstreet estimates, was measured as a result of the end of a period that was characterized by businesses receiving grants and relief funds in the first months of the war. According to Dun & Bradstreet, more businesses will close than open in 2025. This is due to the costs and adverse effects of the war on people.
Silver lining
However, there is also a a positive aspect. There was a 60% decrease in the number of companies and businesses that failed to meet financial obligations. Although the rate of bankruptcies has moderated throughout 2024, and was lower in the second half of the year due to the "solidarity" during the war, which included relief funds and concessions made by suppliers, as well as assistance from government agencies and debt relief provided by banks in some cases.
However, Dun & Bradstreet estimates that the cash flow distress created during the war will have a negative impact in 2025.
The data also shows that small and medium businesses were impacted the most this year. Contracting firms have experienced a cash crunch, a 47% increase in difficulty meeting obligations, and 15% increase in payment delays, with further deterioration expected in 2025.
High sensitivity to market changes
Ronny Alpern, VP of Data, Analysis and Products at Dun & Bradstreet: "Small and medium-sized business owners are the ones who have suffered the most severe economical damage as a result of the war so far with cash flow difficulties that have doubled and even tripled in some cases. This is a business sector characterized by particularly high sensitivity to market changes, as many small businesses depend on the activities of the owners or on a limited number of employees, which increases the impact of a shortage of manpower, such as in the case of reserves."
Get the Ynetnews app on your smartphone: Google Play: https://bit.ly/4eJ37pE | Apple App Store: https://bit.ly/3ZL7iNv
According to Alpern, the consequences will continue in 2025. "We estimate that a significant part of the effects will also be manifested in the coming year, especially in delayed payments and access to sources of financing," he said. "Business owners will need to exercise extreme caution, carefully examine the payment capacity of suppliers and businesses with whom they work, while avoiding a 'chain reaction' of payment failures that could worsen the damage even further and cause the collapse of additional businesses. Prudent financial management and close monitoring of expenses and income are the key to minimizing the consequences."
What can we expect for 2025?
According to Dun & Bradstreet estimates, in 2025 there may be a deterioration in the ability to settle debts due to cash flow difficulties that arose in 2024. However, the Israeli economy has been characterized in recent years by a positive addition of businesses to the economy every year, with the exception of the COVID year, which was an exceptional year in which approximately 70,000 businesses closed.