90% of Global Businesses at Risk from Strait of Hormuz Disruptions

UN Trade and Development warns that disruptions in the Strait of Hormuz could exclude small firms from global value chains, even after trade volumes recover. This exclusion effect primarily impacts companies unable to distribute costs across multiple suppliers and markets. Small and medium enterprises (SMEs) represent 90% of global businesses, 70% of employment, and 50% of GDP, according to International Labour Organization figures. Small firms in developing economies face higher cost exposures than larger firms. For instance, they spend 19.4% of import value on customs and fees, compared to 14.7% for larger firms. Additionally, one in four small firms pays over 4.2% of sales for electricity, while large firms pay 3.7%. Access to finance is another challenge, with 48% of small firms citing it as an obstacle, versus 38% of large firms. Average borrowing costs for SMEs are around 15.8%, compared to 10.3% for larger borrowers. The report highlights that rising costs in energy, transport, and financing can lead to reduced margins, production cuts, and potential exits from the market. Historical data shows that during COVID-19, 88% of small firms reported falling sales, averaging a 57% decline, compared to 47% for large firms. UNCTAD urges governments to support SME access to trade finance and monitor their market connections during shocks. The report emphasizes the critical role of SMEs in job creation and warns that their exclusion from value chains can lead to increased unemployment and social vulnerability.

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