50,000 Israeli companies at risk

Most companies have taken aggressive steps in response to the crisis, while also cutting costs.

closed sign 88 (photo credit: )
closed sign 88
(photo credit: )
Despite early signs of a recovery in the economy, the number of companies whose business activities are under threat rose to 50,000 in April, according to Business Data Israel's monthly risk index. "Over the last two weeks, we are experiencing the first signs of some kind of recovery in the economy," Eyal Yanai, co-director of Business Data Israel, said Wednesday. "However, it does not mean that the economic crisis is over. The most recent data shows that the business-risk level is still on an upward trend for nearly a year. Businesses are still suffering from a liquidity crunch as they are having difficulties to raise credit necessary to continue their current business activities." The majority of companies have taken aggressive steps in response to the crisis, such as efficiency measures, while also cutting investments and costs, he said. The average weighted risk level in the economy in April rose to 6.38, up from 5.81 during the same month last year and 6.25 during March. The number of businesses at high risk increased in April compared with the previous month. Out of the total number of companies analyzed by BDI economists, 50,000, or 25 percent, were rated as highly risky and dangerous, with an average weighted risk level of 9 and 10, up from 20% in March. BDI economists said these businesses were suffering from great liquidity problems, reports of bouncing checks, and big losses in revenues and profits. The great level of difficulties faced by these companies and businesses would threaten the continuation of their business activity for the coming year or two, they said. Nearly all of the four riskiest sectors experienced a worsening in business risk in April compared with the preceding month, with a business risk rating of more than 7. The restaurant and cafes sector was rated the riskiest in April, with a business-risk rating of 7.30. Haulage services was the second-riskiest sector, with a business risk rating of 7.04. The tourism and hotel sector was third, with a rating of 7.03. The business-risk level in the construction sector was 6.97 in April, up from 6.87 in March. The paper and carton sector had the highest rating in April, with an average business-risk level of 5.33, followed by the chemicals sector, at 5.45, and the cosmetics and pharmaceuticals sector, at 5.62. Year-on-year comparisons showed the biggest deterioration in the business-risk rating for the textile, clothing and shoe sector, at a rate of 13.4%. The biggest improvement on a year-on-year basis was found in the communications sector, which improved at a rate of 2.5%.