With roughly 97% of New Zealand enterprises categorised as small businesses – that is, 20 or fewer employees – accounting software platform Xero’s newly released analysis provides a stark picture of the severe impact of Covid-19 throughout the sector.
What exactly does the data show?
Essentially, the data shows that year-on-year revenue for small businesses fell by 10% after New Zealand recorded its first Covid-19 case in early March and continued to drop in April by 34%, a few weeks into alert level four. The graph below shows revenue tracking along at around 5% year-on-year growth throughout January and February and then plunging in early March.
What about job losses?
The analysis shows that even before the level four lockdown the number of jobs in small businesses began to plummet, falling by 4% (or 24,000 employees) throughout March before levelling out at the end of the month when the wage subsidy came into effect. The graph below provides a telling visual of the significance of the wage subsidy, and how it stemmed further job losses and enabled businesses to retain their staff throughout the lockdown.
Do the job losses differ throughout New Zealand?
While job losses throughout the country were varied, no regions were immune to Covid-19’s devastating impact on employment. Auckland, Hawke’s Bay and Northland were among the first to see decreases in employment in late March but after several weeks in lockdown, the rest of the country followed.
In the last week of April, Auckland saw the largest drop in employment (5.7%) followed by Hawkes Bay (5.3%) and Northland (4.9%).
While the Bay of Plenty saw an increase in employment in late March, by late April it had dropped by 3.6%.
What needs to happen to bolster small businesses?
Craig Hudson, Xero’s managing director of New Zealand and the Pacific Islands, emphasised that cash flow is more critical than ever to support SMEs and urged New Zealanders to continue supporting local businesses and explore the country.
“If we can keep money circulating around the country, this will be one of the ways to help alleviate the economic shock of lockdown as we begin to reopen as a nation,” he said.
“Aotearoa is a country of wonder and a surge of domestic tourism would go a long way in supporting key regions that were hit hard and fast.”
He also said that a crucial way to support the small business sector was for bills to be paid promptly. This was emphasised by Minister for Small Business Stuart Nash, who, based on Xero’s data, reiterated a previous call for large businesses to begin paying invoices within 10 working days.
“Xero has reinforced the government’s call for significant private enterprises to help support the economic recovery by paying their bills promptly,” Nash said.
“All businesses across supply chains have a part to play in keeping cash moving and keeping the economy moving. SMEs have been hit hard by the global pandemic. Now more than ever, they need to be treated fairly as we emerge into a recovery phase.”
The Bulletin is The Spinoff’s acclaimed daily digest of New Zealand’s most important stories, delivered directly to your inbox each morning.