Over 120,000 Israeli Small Businesses Close Amid Political Neglect and Ongoing Conflict
Since the outbreak of the "Iron Swords" conflict, more than 120,000 companies and small businesses in Israel have shut down, marking a severe economic crisis for the self-employed and small business owners. This figure surpasses previous annual records of business closures, with about 59,000 closures in 2024 and 61,000 in 2025. The prolonged conflict, including continuous reserve duty, missile attacks on urban centers, and physical and psychological damage to business owners, has devastated many enterprises, especially in northern and southern Israel.
A State Comptroller report highlighted that government aid mechanisms and state-guaranteed funds suffered from heavy bureaucracy, resulting in extremely low utilization rates of special credit programs, some nearly 0%. Consequently, many businesses collapsed before receiving any financial support. The economic fallout includes an estimated loss of 30 to 40 billion shekels in national output due to lost workdays, taxes, production lines, and supply chain disruptions, with the government losing billions annually in VAT, income tax, and social security revenues.
Despite efforts by the Federation of Israeli Self-Employed and Small Businesses (LEHAV) to push for fair compensation and critical legislation to provide a safety net during crises, lawmakers have largely ignored these initiatives. Proposed measures included a permanent safety net for self-employed individuals forced to close during emergencies, enforcement of payment ethics laws to prevent government payment delays, tax relief and exemptions for businesses in conflict zones, and incentives for economic growth such as accelerated depreciation and reduced property taxes.
As the political system focuses on election campaigns, slogans, and security issues, small business owners feel abandoned. Politicians often visit local businesses during campaigns but fail to deliver effective recovery plans post-election. LEHAV President Attorney Roy Cohen warns that the self-employed and small business community, numbering around one million, will remember those who neglected them and may withhold support in upcoming elections.
"This time it will be different," Cohen states, emphasizing the need for genuine commitment to revive the sector that forms the backbone of Israel's economy, including street shops, garages, contractors, and restaurants. The article underscores the urgent need for political accountability and practical solutions to prevent further economic damage to Israel's small business sector.
