As the economic impacts of the COVID-19 pandemic worsen, more than half of US companies are under financial or operational stress, according to new research by the Boston Consulting Group.
BCG's analysis found that more than 60 percent of US companies are under financial or operational stress as of the end of Q2 2020, a 49 percent increase over the same quarter last year. A further 14 percent are in distress, meaning they're having difficulty meeting their financial obligations or under operational pressure that requires major restructuring, according to BCG.
The newly released findings were part of the BCG TURN Radar index, which was developed by BCG's special transformation, turnaround, and restructuring unit. The index looks at a company's level of distress by looking at 20 key performance indicators across three categories: financial, market, and qualitative. The index reports on more than 25,000 publicly traded companies with more than $100 million in revenue across 80 countries and 20 industry sectors.
The numbers were even worse outside of the US, with 83 percent of companies in Central Europe, the Middle East, and Africa reporting being in distress. The report clearly shows the global economy is still in the throes of the economic crisis brought on by the pandemic, which is still raging on in the US and elsewhere.
The industry sectors suffering the worst under current economic conditions included automotive and mobility (52 percent stressed, 16 percent distressed); travel and tourism (61percent stressed, 16 percent distressed); and retail (67 percent stressed, 18 percent distressed), according to BCG.
"BCG TURN Radar confirms the impression created by stories of business failures and layoffs—the COVID-19 pandemic is causing deep, structural changes that are likely to be long-lasting," says Luke Pototschnik, BCG senior partner, and head of the firm's Transformation practice and BCG TURN in North America. "The impact may be most severe on companies that were challenged to begin with. But the good news is that there are actions companies can take—such as generating short-term cash to fund long-term investment—that can mitigate the worst of the downturn and help set them on the path to recovery."
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