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Researchers of Klaipėda University present a lockdown picture of businesses in Klaipėda region
12-01-2021

A team of researchers of the Department of Economics, Faculty of Social Sciences and Humanities of Klaipėda University under the leadership of dr. Rasa Viederytė have been analysing the socio-economic situation of businesses and municipalities in Klaipėda Region throughout the last six months: they conducted surveys of business and municipal representatives, had discussions in target groups, and collected and summarised numerous data and legal acts in order to find out how the businesses in Klaipėda Region were affected by the first, the so-called spring, lockdown and by the governmental support and other interventions to stabilise the situation. The researchers had set an objective not merely to identify either positive or negative consequences of the crisis situation in the region, but also to formulate recommendations both for business and governmental and municipal institutions in case strict social and economic restrictions were to be reintroduced. Today, the research project was first presented to the public. The researchers are also planning meetings with business and government representatives, as the business people who collaborated with the team hoped to be heard so that in the future, in the case of force majeure in the country, the same mistakes would not be repeated. When introducing the team of KU researchers and the outcome of their work, prof. dr. Artūras Razbadauskas, Rector of Klaipėda University, was happy to state that the main topicality of the present time became the object of their research. “The mission of the University is to identify problems relevant to the region, to analyse them, and to provide science-based conclusions. The topic of COVID-19 has a number of problematic sections, one of which is the impact of the pandemic and the Government anti-crisis actions on business in the region. I believe that the analysis and insights of the researchers will be a good material for the reflection on what can be done by politicians, governmental  institutions, and businesses to prevent a crisis from becoming a destructive test “, said KU Rector dr. prof. Razbadauskas.

Field of research: the lockdown spring in Klaipėda Region

According to the assessment of the severity of restrictions imposed by the Government, the lockdown in Lithuania was seen as quite strict: our country’s indicator was 68.52 points; for comparison, in Latvia it was 57.41, in Estonia, 29.63, and in Poland, 71.3 points. The lockdown regime in the country was introduced on March 16 and lasted for three months, until June 16. Both public institutions and businesses as well as citizens had to learn to live in a different reality: to experience social isolation, to get to know and master distance work and learning technologies, and to stop or close businesses if it was not possible to organise them under restrictions.The KU team chose Klaipėda Region and businesses operating in seven of its municipalities (Klaipėda City and Klaipėda District, Palanga, Neringa, and Kretinga Cities, and Šilutė and Kretinga Districts) as research areas. The researchers analysed the data from the surveys received from the regional business community and held meetings-discussions with target groups. A total of 77 questionnaires representing small and medium-sized businesses of the region and 7 target group discussions were summarised. “At the start of our research project, we expected the business community to be more active and willing to collaborate, however, we also understood their reality too well: we were working the hardest at the time when the businesses tried to recover after the spring lockdown and to prepare for the unpredictable autumn, when restrictions could start tightening again. Still, the collected material allows us to reflect the state of the regional businesses and their lockdown experience and to assess the effectiveness of the Government’s actions,” says the project manager dr. Rasa Viederytė.

Impact on businesses: no bankruptsy, yet lower pay and unplanned vacations

Of the small and medium-sized regional businesses that participated in the research, as many as 50.7% experienced the Government-imposed activity restrictions; the activity of merely 2,7% of them were not affected by the lockdown; one third were forced to organise their activity remotely; and another 2.7% suspended their activity. Only a quarter of the respondents (24,7%) indicated that their turnover indicators remained unchanged in the spring, and just 1.4% enjoyed their growth, while the rest of the businesses lost 20 to 50% of their usual turnover. It was the manufacturing companies that maintained the most stable turnover indicators, and the largest losses were experienced by the trade and service sectors. Although some representatives of the latter sector reported an increase in the turnover indicator, the study of the business environment did not capture lockdown-specific activation of e-shop development.

Average salaries did not change in about half of the surveyed companies, while about one fifth of them reduced the salaries by more than 10%; however, even under such conditions, in some businesses the salaries increased, as reported by 4.1% of the business entities. Most businesses (as many as 89%) managed to keep the number of jobs unchanged. The measures that allowed to retain employees included their going on annual compulsory vacation (46,4%.); employees were in downtime or partial downtime (26,1%); or they agreed to salary reduction (14,5%), etc.

Unfulfilled expectations: lack of communication with business

Almost 60% of the business entities used the Government’s support, of which as many as 88% stated the support was used to save jobs. Applications for support with the aim of ensuring the continuity of economic activity during the lockdown period were submitted by merely 52,1% of business entities; the others saw no need for it or feared cumbersome procedures. The most common forms of support requested included support for micro-enterprises, loans to businesses affected by Covid-19, and rent compensation. The most popular support measures provided by municipalities were tax and fee reductions and deferrals, rent deferral, and cancellation of local charges.

The evaluation of the research material revealed the view of the business community on the effectiveness of the Government’s compensatory actions.Those who did not use the support named the following reasons: lack of information on the governmental / municipal support for business in one place; unclear obligations to the state after receiving support; state support measures were highly fragmented, etc. The businesses expected an effective “one-stop-shop ” principle when all the information about potential support spread from one source. In reality, business people had to look for information themselves, to fill in the documents for support by method of speculation, and afterwards wait in suspense: the communication as to why the application was rejected was not received. According to business representatives, municipalities could have acted as mediators and /or consultants for businesses in obtaining the governmental support, however, they stayed aside. Business people cited excessive bureaucratisation and long administrative deadlines as a major shortcoming.

Interestingly, in the qualitative surveys, the Government’s decision to introduce lockdown and its measures was considered adequate by the majority of the respondents. Discussions identified measures such as the granting of incapacity benefits to parents staying at home to look after children; requirements for wearing masks in cafes or bars; or restrictions on the operation of marketplaces at the same time as the supermarkets were allowed to continue as dubious and redundant.

Incidentally, business representatives positively assessed the practical assistance of municipalities at the beginning of the lockdown in helping them obtain disinfectants.

Palanga suffered the most, optimism was broadcast by Neringa

When assessing the specifics of businesses in the regional municipalities, KU researchers concluded that Palanga’s tourism-oriented businesses suffered the most from the spring lockdown regime (50% stopped operations, and the remaining 50% worked under the conditions of economic activity restrictions). Other municipalities of the region did not need such a drastic suspension of businesses, they were occupied by different problems: adaptation to work under the lockdown conditions or remotely.

Probably Neringa was the regional municipality that survived the crisis in the easiest way. The strictest period of the lockdown happened at the time when Neringa was still preparing to receive tourists, and along with the easing of restrictions came the summer season with holidaymakers loyal to the resort. Incidentally, Neringa Municipality stated that it deliberately abstained from communicating prohibitions and threats.The coronavirus actually also bypassed this municipality.

All the surveyed Palanga business entities indicated that the lockdown would have negative consequences for the financial results of 2020, while at the same time as many as a third of Neringa people planned a better income.

Lessons. And what if again

“Researchers need to identify not only negative but also positive effects. If the door closed, maybe the window opened? For quite a few businesses, the lockdown period was a stimulus to revise the activity of their companies without delay, replan investments, and look for new markets”, says Rasa Viederytė, the head of the research team.

The research team have no doubt that the lockdown that hit Lithuania in the spring practically established a remote way of work organisation. “The research revealed that remote work organisation for businesses was one of the biggest challenges of the pandemic reality, therefore we prepared recommendations for businesses on its organisation,” says researcher Henrika Ruginė.

The study listed researcher-prepared recommendations for governmental institutions on the development of new strategies to overcome potential crises. The key conclusion was that crises needed to be prepared for, and possible anti-crisis action plans were to be prepared, constantly reviewed, and updated in order to avoid chaotic action at a crucial moment.

The study Effectiveness of COVID19related Restrictions on Economic Activity and the Impact of State Interventions on Enterprises in the Klaipėda Region can be found at: https://www.ku.lt/shmf/wp-content/uploads/sites/60/2020/12/mokslo-studija-su-isvadomis-ir-rekomendacijos-P-COV-20-51.pdf