Impact of COVID mobility measures on the financial performance of small business in rural areas of Spain

Abstract

[Abstract] The COVID-19 pandemic impacted public health and the economy, precipitating measures such as lockdowns and mobility restrictions that have profoundly affected businesses and employment. To assess the impact of these restrictions on the financial performance of micro and small firms in rural areas, we draw upon official Spanish population mobility statistics from 2019 to 2021. Our research is motivated by the pandemic's uneven economic burden and expected lasting changes in consumer and business behaviour. Our findings reveal a notable shift in population retention patterns within rural areas, which were able to retain more daily population not only during the pandemic, but also post-pandemic. We observe four distinct impacts on the financial performance of rural enterprises. First, industries oriented to local demand, such as real estate and hospitality, were hit particularly hard in 2020. Second, population retention in rural areas helped firms in these industries to perform better in terms of revenues and employment, while demand-driven positive impacts led by population retention are not translated into profitability. Third, firms in industries that may easily resort to digital work environments suffered less the impact of COVID-19 both in terms of revenues and employment. Fourth, firms in industries where employment adjustment is difficult to achieve show a clear negative impact in terms of labour productivity. This research addresses a gap in understanding the pandemic's effects on rural small firms and offers insights to inform targeted policy interventions.