UN Report: Hormuz Risk Could Exclude 90% of Businesses from Trade

Small firms could be pushed out of global value chains by Strait of Hormuz disruptions, even after trade recovers, UN Trade and Development warns.

UNCTAD labels this hazard an "exclusion effect". The risk from Hormuz hits hardest on businesses unable to diversify their suppliers, markets, and lenders, the agency contends.

Small Firms Carry the Heaviest Share of the Bill

Most of the global economy is composed of smaller companies. The report, citing International Labour Organization data, says micro, small and medium enterprises account for 90% of businesses worldwide, 70% of jobs and 50% of GDP.

Small and medium enterprises face a broader cost exposure than their larger competitors. The most obvious example is importing. In developing economies, small firms pay 19.4% of import value on customs, broker fees and other costs, compared to 14.7% for large firms.

The same disparity exists for electricity. A quarter of small firms in developing nations spend over 4.2% of sales on power, while large firms pay 3.7%.

Financing is the third area of pressure. In developing economies, 48% of small firms see access to finance as a barrier, while 38% of large firms say the same. SME borrowing costs average around 15.8% in those countries, versus 10.3% for larger borrowers.

“As energy, transport and financing costs climb, margins shrink and supply chains become disrupted. The pressure can force firms to scale back production, postpone investment or exit altogether. Exclusion becomes a constant risk,” the report read.

The Pandemic Already Wrote This Script Once

Historical disruptions support this concern. In the COVID-19 pandemic, 88% of small firms in developing countries said sales declined, compared to 81% of large firms. The drops were also larger, with small firms seeing an average 57% fall and large firms 47%.

UNCTAD urges governments to protect small firms' access to trade finance, liquidity and working capital. It also calls on policymakers to track whether smaller businesses maintain their market links during a shock, instead of only monitoring trade flows and sales.

“As engines of job-creation, micro, small and medium-sized enterprises are critical to every country’s future,” António Guterres, UN Secretary-General, said.

When small firms exit value chains, UNCTAD enumerates the consequences: unemployment increases, household incomes drop and social vulnerability grows. That is why firm size should be treated as a core trade statistic, not an afterthought.