Some U.S. businesses are facing a spate of difficulties amid the ongoing government shutdown, according to the Wall Street Journal (WSJ).
Democrats blocked a GOP spending bill to fund the government on Sept. 30, kicking off a funding lapse on Oct. 1 at 12:01 a.m. Certain U.S.-based companies are grappling with various issues since the shutdown began, including government-backed lending for small businesses ceasing and having to lay off employees, the WSJ reported on Wednesday.
Agencies are unable to issue or pay for many new contracts and planned workplace safety inspections are paused, along with numerous regulatory reviews, the WSJ reported.
Some small government subcontractors have expressed concerns over when the shutdown will end and whether they will receive pay for certain work they have already done, the WSJ reported.
“That’s a very scary place to be in as an entrepreneur,” Brian Butler, president and CEO of Vistra Communications, a marketing and communications firm based in Florida, told the WSJ.
Butler was forced to lay off five of his 80 total workers this past week after the government shutdown precipitated a stop-work order on one of its projects, the WSJ reported. He told the WSJ that he has paid the employees one week’s wages and is also covering their portion of health-insurance costs for this month.
“If I receive one, two, three more of these, I’m not sure I can do that for that many people,” Butler told the WSJ, referring to the stop-work orders.
Didi Azaria, CEO of Workiz — a field service management software company — told the WSJ that roughly 40% of sales for the company’s 127,000 customers are from commercial or government accounts and the company has faced an increasing amount of delays related to the ongoing shutdown.
“Every job is getting delayed, or they’re not getting paid on time,” Azaria told the WSJ. “It creates a cash problem, meaning you cannot buy equipment, you cannot pay your employees.”
National Economic Council Director Kevin Hassett said Monday during an appearance on CNBC’s “Squawk Box” that the government shutdown could cost the U.S. economy approximately $15 billion per week.
“My friends over at the Council of Economic Advisers gave me a report at the end of the week that said that it costs the U.S. GDP [gross domestic product] about $15 billion a week for a shutdown, or about a tenth of a percent of GDP,” Hassett said during the Monday interview.
“And so if the shutdown continues for a long time, then there are going to be a lot of things that don’t happen, and it will show up in the GDP number,” Hassett added.
Fire Starter Studios, a California-based video-production company, typically gets about 50% of its revenue from federal contracts, according to the WSJ. Shortly before the funding lapse began, Fire Starter completed the General Services Administration process that allows it to contract with government agencies at preset rates, an endeavor that took two years and cost about $10,000, the outlet reported.
“Now we have nothing to show for it,” Fire Starter Studios CEO Rachel Klein, who maintains anywhere from one dozen to 200 employees at a time, told the WSJ. “No new business now means no money in two, three or four months.”
Additionally, some businesses that do not directly work with the federal government have been concerned that American consumers will reduce their spending as the shutdown drags on, the WSJ reported.
“We know from past experience that we will see lower sales than we would have as long as the government shutdown lasts,” Mike Roach, co-owner of Paloma Clothing, a women’s clothing retailer based in Portland, Ore., said, according to the WSJ. “When consumers are less confident, they spend less money.”
“I can guarantee you that every small-time retailer like Paloma is pulling their hair out,” Roach added.
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