Small and medium-sized enterprises (SMEs) face a growing risk of being pushed out of global value chains as disruptions around the Strait of Hormuz, linked to the ongoing US-Iran war, drive up energy, transport, insurance and financing costs.
According to the United Nations Conference on Trade and Development (UNCTAD), the disruptions threaten jobs, household incomes and livelihoods, with smaller businesses likely to bear a disproportionate share of the impact.
UNCTAD says the effects will not be felt equally across businesses because smaller firms typically have fewer suppliers, markets and financing options to help them absorb economic shocks than larger companies.
The stakes are significant because SMEs account for about 90 per cent of businesses globally, 70 per cent of jobs and 50 per cent of global gross domestic product (GDP).
Their exclusion from global supply chains could therefore undermine the inclusiveness and resilience of economic recovery, even if global trade volumes eventually return to normal.
UNCTAD says smaller firms already face higher costs when importing goods, particularly in developing economies.
Between 2023 and 2025, the cost of complying with import requirements stood at 19.4 per cent of the value of products directly imported by small firms in developing countries, compared with 17.5 per cent for medium-sized firms and 14.7 per cent for large firms.
The gap was narrower in developed economies, where the corresponding costs stood at 8.3 per cent for small firms, 7.8 per cent for medium-sized firms and 7.6 per cent for large businesses.
The UN says these cost disadvantages could widen as disruptions around the Strait of Hormuz push up freight rates, energy bills, insurance premiums and financing costs.
Smaller companies also have greater difficulty accessing finance and generally face higher borrowing costs, leaving them more vulnerable when crises disrupt cash flows and payment cycles.
Previous global shocks highlight the vulnerability of smaller enterprises.
During the Covid-19 pandemic, an average of 64 per cent of small firms in developed economies reported declining sales, compared with 60 per cent of medium-sized firms and 58 per cent of large companies.
In developing economies, the proportion was even higher, with 88 per cent of small firms reporting declining sales, compared with 85 per cent of medium-sized businesses and 81 per cent of large firms.
The scale of the decline also increased as firms became smaller. Small businesses in developed economies recorded an average 40 per cent fall in sales during the pandemic, compared with 35 per cent for medium-sized firms and 31 per cent for large firms.
In developing economies, sales fell by an average of 57 per cent among small firms, compared with 51 per cent for medium-sized enterprises and 47 per cent for large businesses.
The UN warns that the effects of excluding SMEs extend beyond individual companies. Business closures and reduced operations could increase unemployment, lower household incomes and deepen social vulnerability.
The agency says governments should monitor SMEs’ participation in trade and supply chains during and after economic shocks while protecting their access to trade finance, liquidity and working capital.
It also calls for stronger public support for logistics, trade facilitation, market information and other business services, particularly in developing economies. At the same time, governments should adopt measures to improve SME productivity and competitiveness and help businesses diversify their suppliers and customers.
“As engines of job-creation, micro, small and medium-sized enterprises are critical to every country’s future,” UN Secretary-General António Guterres said.
