As many as 21,700 restaurants could close permanently from COVID-19 economic fallout

As many as 21,700 restaurants could close permanently from COVID-19 economic fallout

The most optimistic forecast shows 20% of Illinois’ food service business closures will be permanent. But up to 85% of restaurants expect to close permanently.

Limited dine-in service returned to Illinois restaurants on June 26, but for anywhere from 5,000 to 21,700 food service businesses it may already be too late to recover from the COVID-19 closure mandate.

According to the Illinois Restaurant Association, 20% of food establishments are expected to remain closed due to COVID-19-related economic fallout. If that estimate is correct, that means nearly 5,100 businesses will be forced to shut their doors permanently.

Chicago after 22 years just lost Blackbird, it’s Michelin-starred fine dining standout with a James Beard award-winning chef.

“We’ve labored long and hard over this decision,” partner Paul Kahan told the Chicago Tribune. “But in an incredibly small, tight dining room – operating at only 25% capacity for who knows how long – and removing the opportunity to do private dining, it becomes incredibly difficult to manage.”

While the 20% estimate is troubling, the closures could be far worse. Surveys show only 30% of businesses in the industry were expecting to be able to survive if the crisis lasted for four months, while only 15% expected to be able to survive if COVID persisted for six months. Business closures of this magnitude would mean that 17,800 to 21,700 Illinois restaurants would remain closed for good.

Kristan Vaughan’s family already lost one of their seven Irish pubs in the Chicago area and have been able to bring back just a fraction of the 160 employees they had before the pandemic.

“We are open now, all of our locations except for one, that in doing the numbers we’re not going to be able to open. So it’s for sale if someone’s interested,” she said. 

The accommodation and food services sector has been among the hardest hit with job losses since February, with employment down 233,500 (-44%) from February to May. With many businesses in the industry expected to be closed permanently, many of those job losses could become permanent.

New unemployment data released July 2 by the Department of Labor shows an additional 45,249 Illinoisans filed for benefits during the week ending June 27, bringing total job losses to 1.38 million since COVID-19 started impacting the economy. New unemployment claims remain 5 times higher than in normal times.

While the number of new jobless claims has flattened during the past month, new initial unemployment claims remain nearly five times higher than this time last year. Although the unemployment claims data appears to be improved from the past couple of months, Illinois’ economy, which lost nearly 800,000 jobs at the peak of the crisis, has yet to see any substantial jobs rebound.

Lockdowns hurt, as the evidence suggests most small businesses have less than two months of cash on hand while the median small enterprise has more than $10,000 in monthly bills and less than one month of cash on hand. Illinois’ small businesses create the majority of new Illinois jobs each year. Allowing businesses to open again is an important step to save lives and livelihoods.

Although lifting a lockdown will not restore economic activity to levels observed before the pandemic, research shows the sequential lift of a lockdown is the best way to mitigate both the human cost of the virus and the economic damage. Instead, Illinois’ economy has been left with a vague, broad-based re-opening plan that requires a vaccine – which may take over a year to develop – before fully opening the economy again.

Further, Illinois voters need to consider the effects of the progressive income tax hike state leaders are seeking Nov. 3. Economists argue against increasing taxes during a recession. A progressive tax will increase taxes up to 47% on more than 100,000 small businesses just as they are trying to recover from the COVID-19 economic damage, and those small businesses are responsible for the vast majority of new jobs in Illinois.

A safe return to work for Illinois families is the first step to revive the Illinois economy. A tax increase would be a misstep.

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