Due to the ongoing war on several fronts, 60,000 Israeli companies could be forced to close in 2024

The Israeli information company CofaceBDI expects that up to 60,000 companies will have to close in 2024. This gloomy forecast follows the more than nine-month war between Israel and the terrorist organization Hamas and the conflicts with Hezbollah forces in the north.

CofaceBDI surveyed managers of 550 companies from various Israeli business sectors about the impact of the war on their business. A narrow majority – 56% – reported declining sales in their company due to the war. While this is a significant number, it represents an improvement from a survey in January, when about 64% of companies reported declining profits.

The ongoing war has already hit the Israeli economy with labor shortages, inflation and falling revenues. In addition, many local businesses have been disappointed by the Israeli government’s inadequate financial support during the war. Since the Hamas terrorist attack on October 7, around 46,000 Israeli businesses have already closed, according to the CofaceBDI.

Yoel Amir, CEO of CofaceBDI, estimates that the ongoing war affects all sectors of the Israeli economy.

“There is virtually no sector in the economy that is immune to the effects of the ongoing war,” said Amir told The Times of Israel. However, he noted that tourism, agriculture, construction and entertainment were the sectors most damaged by the military conflict.

“Agriculture, but especially the construction industry, is suffering from a severe shortage of labor, which is causing significant delays in projects and the handover of housing,” he estimates. “We are seeing some influx of foreign workers returning to Israel, but the low supply has also led to higher salaries and higher hiring costs.”

“Companies are grappling with a very complex reality: the fear of an escalation of the war and the uncertainty about when the fighting will end. Added to this are ongoing challenges such as staff shortages, low demand, growing financing needs, rising procurement costs and logistical problems. And finally, Turkey’s export ban. All of this is making it increasingly difficult for Israeli companies to survive this period,” said Amir.

In early May, Turkish President Recep Tayyip Erdoğan announced a complete trade freeze with Israel because the Turkish president opposed Israel’s defensive war against Hamas aggression. At the time, Israeli Foreign Minister Israel Katz quickly called sentenced Erdoğan said he had “crossed a line and blocked ports to Israeli exports and imports. This is how a dictator behaves – trampling on the interests of the Turkish people and businessmen and ignoring international trade agreements.”

Israel is reportedly considering responding to the Turkish trade ban with a Ban on direct imports from Turkey, a move that could potentially increase costs for businesses in Israel. The war has hit small businesses particularly hard. A full 77% of the businesses that have recently been forced to close were companies with up to five employees.

“After the boycott of Turkey, there are also fears that other countries will follow with similar steps as importers look for alternative suppliers from other countries,” said Amir.

He called on the Israeli government to “signal to the market and investors that it is capable of taking tough decisions to restore stability.”

In normal years, an average of about 40,000 Israeli businesses close each year. Although the current closure rate is well above average, it is still below the record of 76,000 businesses closed in 2020 during the coronavirus pandemic.