Prosper / Tax Management NZ

Small Business Resilience Survey

Results of our Sept 2020 Survey

Confidence strengthens but

faith in Government wanes
It is a hard, slow slog but gradually more
small businesses are beginning to steady
their finances and the number feeling
confident in their future viability is cautiously
improving.
Those 102 days of relative normality
between the elimination of the original
Covid-19 outbreak and the second enabled
sales to bounce back for many firms and a
mix of cost controls and Government
assistance to have a positive effect.
But make no mistake, the second outbreak,
which plunged Auckland back to alert level
3 and the rest of the country into level 2,
has hit hard.
And it has seen a slip in confidence in the
Government’s ability to deliver on adequate
control of the virus spreading.
Small business owners want to see stronger
border control measures and, if we need to
go back up the alert level scales yet again,
they want greater localisation of lockdowns
instead of forcing regions with no cases into
restrictions they see as unjustified.
The measures being taken at the moment
are seen as too blunt. More precision, more
flexibility, more sophistication and more use
of technology to trace movement is wanted.
The survey was conducted over 22 days
and covered the period when Auckland
went into partial lockdown at Level 3 with
police check points on its borders, then
moved to level 2.5, and the rest of the
country was at Level 2.
.

These are the findings drawn from the

September Prosper / Tax Management NZ
Business Resilience Survey a self-selecting,
online survey which drew almost 2000
respondents.

The support for tough measures to eliminate

Covid-19 remains, but there is a growing
feeling that better balancing of health and
economic sustainability is achievable.

What business owners are saying:
“The Government is doing the right thing,
but in saying that small businesses won’t be
able to take many more resurgences of
Covid-19 before it all turns to custard. That's
putting it mildly.”
“I agree with Government actions, though it
has a huge personal cost.”
“The situation is extremely difficult for our
business and family. But that does not
mean it is the wrong thing to do. Our
personal business may become a casualty,
but we view it as being caused by the virus,
not the Government. The science is clear.
Other opinions are largely motivated by
political gain or grandstanding for short term
economic reasons.”
“While 100 per cent of our business has
been stopped by border closures, I feel the
decision to protect the vulnerable/elderly
outweighs my financial security.”
“The quicker we eliminate, the quicker we
get back to business as usual. Every other
country is limping along with prolonged
restrictions and they have ongoing
community spread. That would be far more
damaging in the long term than a short,
sharp level 3 lockdown.”
“I agree that a good health response
equates to a good economic response in
the long term.”
“To be blunt, I'd prefer my customers to be
alive than be dead.”
How tough has it been
The toll Covid-19 has taken on our small
businesses is clear – and grim.
A sobering 73 per cent of respondents to
our survey report they’ve taken a hit. Their
trade and the number of sales they’re
making is behind where they were at the
same time last year – 55 per cent say sales
are significantly down.
In contrast 10 per cent are managing to
tread water and keep the same level of
trade as last year. And 16 per cent have
managed to benefit from Covid-19, seeing
sales increase.
It is interesting to see that cost control or
Government assistance has managed to
mitigate the impact for some. While 73 per
cent of SME respondents reported a decline
in sales, only 60 per cent said profit has
also taken a hit.
This can be contrasted with our previous
Prosper quarterly survey in June which
recorded 87 per cent of responding
businesses were expecting to see profit
nose dive.
This shows that a growing number of SMEs
are beginning to adjust the way they
operate enough to buffer the impact.
Of our respondents, 13 per cent predict
they’re going to be able to hold their profit
line to match what they achieved last year.
Another 13 per cent say they’re actually
seen a marginal lift. While 12 per cent of our
SME respondents say they’ve seen a
significant uptick in profit.
Perhaps the most important indicator of
SME health however is the question: Are
you confident that you can keep trading for
the next 12 months? And here again, there
has been a positive strengthening of
sentiment.
While 20 per cent of our respondents say it
is too close to call at this point, the majority,
59 per cent, are feeling good.
Of those, 41.5 per cent say they are
reasonably confident they will pull through
and 18 per cent very confident.
This is a far better result than seen in our
July survey. Then only 47 per cent of
respondents (compared to today’s 59 per
cent) said they felt confident enough to say
they could keep trading for even another six
months if their markets continued to be
affected by Covid to some degree.
This still leaves a grim outlook for just over
a fifth of SMEs. 15 per cent said business
was difficult and they were not confident of
pulling through, 6 per cent believed they will
almost certainly have to cease trading. And
4 businesses had already closed down.
This from one Auckland event industry
business: “If we don’t return to level one
within four weeks my business won't survive
past the end of the year.”
This Manawatu tourism business owner: “I
don't know who I am without my business. I
worked so hard to get myself and my family
out of poverty. I am so close to being back
there again.”

It is, unsurprisingly, tourism and hospo
businesses that are having a harder time
than most. Almost twice as many in that
sector say they are worse off than those
who are doing better than last year.
This from an Auckland backpacker provider:
“My business will fail in the next three to six
months and my landlord will take my home
and my savings to cover his losses and I
can do nothing about it.”
A Bay of Plenty motel owner: “The effect on
business NZ-wide was not anticipated by
the Government and they had no support
mechanism planned. We again took a 60
per cent drop in sales and it has hit us hard
right when we thought business may be
gaining some momentum. It has set us
back significantly. We now face our
traditionally quietest time of the year, with
no profit from January-April to turn to, but
also a massive financial hole from the last
shutdown. It has created a double whammy
in reality as we lost the run-up to September
we were hoping for and it has caused our
financial distress to deepen. Beginning to
feel rather hopeless about it all.”
And from another accommodation provider:
“We were solvent and debt free March 01
2020. We possibly stand to lose everything
and end up bankrupt by March 01 2021 -
through no fault of our own.”
Interestingly it is SMEs that have been
around longer – 10+ and 20+ years of
operation – who are finding it toughest to
recover. They are the businesses reporting
hardest hit profit lines with two thirds of
business ten years or older reporting profit
being behind last year.
Do we still trust the
Government?
The good news for any political party that
forms the new Government is that support
for the fundamental approach to ‘go hard
and try for elimination of the Covid virus’,
remains strong.
Asked ‘do you agree with the Government’s
actions to return NZ to restriction levels’ 68
per cent of our Prosper survey respondents
answered yes, 32 per cent no.
That is actually a fractional increase from
our July survey during the first lockdown
when we asked if small businesses
supported Government actions, which saw
65 per cent support the original lockdown
and 35 disagree with it.
Lockdowns, full or partial, while we quash
the virus are tough – but prefered by most
SMEs to letting Covid run free.
As this Auckland business owner said:
“People make an effort to come out and
support us when we're allowed to trade at
Level 2 and our business when open is
busier than it's ever been. That's why I
prefer short sharp lockdowns, and back to
normal trading compared to the endless
restrictions and lack of customers due to
safety concerns overseas.”
In fact,many called for a longer Auckland
lockdown and stronger restrictions during
the second outbreak, to give greater
certainty the virus had been contained. This
owner of a technology B2B company,
notably in Auckland, was one of those:
“Lockdown restrictions were too weak if
anything. There would be less financial
impact if second outbreak was four weeks
at level 4 than what we have now, level 2/3
for many months.”
And this Otago retailer: “Should have gone
to a higher level in Auckland.”
From a BOP commercial property manager:
“Auckland should have kept its 'borders'
closed until there were no community
cases, while still dropping a level.”
And a pithy line from a Waikato food
retailer: “Should be level 4 till virus 0.”
The Government decision to allow
Aucklanders to fly south immediately after
level 3 was lifted was met with incredulity by
some:
“Letting Aucklanders fly down South is
crazy! It will just undo all the good already
done.”
“That’s just dumb! We will have gone
through Level 3 for nothing when an
Aucklanders spreads the current cluster to
the rest of NZ.”
However, this general approval of the go-
hard New Zealand response – in contrast to
Sweden’s pursuit of herd immunity or the
USA’s more quixotic Trumpian approach –
does not extend to approval of the Labour-
NZ First coalition’s specific handling of
border control, isolation and contact tracing
What business owners are saying
“It’s financially crippling, but it’s a necessity.”
“Elimination is the best way to protect the
economy.”
“A rush to a lower level could see a situation
developing similar to Vic/ Australia resulting
in a far longer downturn / lack of inter
regional travel.”
“Our Government's response means we
have a more normalised life when
lockdowns are lifted compared to other
countries. “
“If our customers' health is not put first, we
won't have any customers to sell to.”
“I feel it is for the greater good, not easy as
a business owner but level 4 would be
horrific.”
But:
“This is an over reaction to a pandemic that
is killing the economy faster than those
infected.”
.
Asked if confidence in the Government had
altered since the second outbreak:
 51 per cent said their confidence
had decreased.
 39 per cent said their confidence
had remained about the same.
 10 per cent said their confidence
had increased.
Lapses at the border which allowed the
virus back in understandably drew the most
ire.
“The government had one job to do ,and
that was to keep covid out and clearly failed
at it letting the team of five million down,
and seem to be still failing at it.”
“Poorly organised border control, little or no
enforcement, makes it all a bit pointless. To
much policy, not enough action
“The Government had no effective controls
at the border so we all ended up paying.”
“I am angry and disappointed that the
Government, single handedly, was unable
to keep the borders secure. They have
caused billions of dollars worth of damage
to the economy due to their incompetence.”
“I struggle with the Government’s actions
due to their poor effort in containing the
virus post NZ becoming Covid free after the
initial lockdown. Not implementing testing
regimes that should have prevented the
virus returning was unacceptable.”
Tighter border control is an obvious area the
Government needs to focus on and there is
widespread expectation that more needs to
be done.
“We should get tighter on the border before
we destroy NZ Inc. New arrivals need to
have a negative test before boarding a
plane and submit to compulsory tests in
Quarantine.
“Border control is poor, should test prior to
leaving country of origin.“
But there were also more nuanced
criticisms, those who believed that there
could have and should have been greater
regional differentiation to restriction levels.
Many respondents criticised the restrictions
and how they were applied in this second
outbreak, calling them “blunt instruments,”
as this Auckland retailer did: “There must be
a far more focused approach to the two
front lines of our defence against Covid -
contact tracing, border control - to limit the
extent of these blunt instrument lockdowns.”
In particular, there are some areas where
the Government is failing the ‘common
sense test.’ The overwhelming example
brought up repeatedly by our respondents
was why the South Island was forced back
up into level 2 because of an outbreak
800km away in Auckland:
“South Island has had no Covid-19 for over
four months. Why ban gatherings?”
“Should not be level 2 in South Island or
any other regions with no Covid cases.”
“Fair enough in Auckland, but in the South
Island , bloody ridiculous!”
There is an expectation that the
Government should be able to apply
restrictions with greater geographic
precision and lean on smarter contact
tracing so restrictions are applied with a
more flexible approach:
“Our fight against Covid can’t be a one
approach process, it will kill the NZ
economy and our children/grandchildren will
be paying the price for decades.”
“Increased restrictions were not necessary
outside Auckland. Adequate contact tracing,
if possible, should ensure safety to go to
level 1 out of Auckland.”
“Wellington has no cases and restrictions
should have never been put back in place.”
“Should have put Auckland into level 3 and
then the rest of the north island into level 2
and the south island into level 1.”
“Auckland maybe - rest of NZ no. There are
places in NZ that have had little or no Covid
that are struggling because of an outbreak
in Auckland that is impacting on very few
people given total population of Auckland. “
“Needed A LOT better planning for regional
lockdowns. Small businesses can move
quickly but we need to know the rules.”
“It’s better to keep things open and manage
things with the right tracking and tracing and
controlling the pandemic.”
"The elevated alert level should only apply
to the region where the clusters are located,
not nationwide
"In areas where covid is present only . The
rest of NZ should be restriction free.”
“No reason to restrict rest of country other
than Auckland.”
“Auckland was the only region affected,
while we agree with their restrictions there
was really no need to to restrict the rest of
NZ. The government had it contained but
penalised everyone and put unnecessary
stress on business throughout NZ.”
“We are a long way from Auckland and
could have stayed at level one until they
lowered the Auckland level and allowed free
travel.”
“We believe that aggressive contact tracing
and managed quarantines could replace the
need for full lockdowns in order to keep the
economy moving.”
There was also, again, unhappiness with
the way essential businesses were
determined. This was seen as another
example of an inflexible approach that
needlessly penalised some businesses.
This view of a primary producer in the
Waikato sums up much of that feeling:
“From the start , the definition of an
essential business has been wrong, eg why
couldn't builders operate, self employed,
fencing contractors, fruit and vege shops,
local butcher, these businesses should have
been allowed to operate, a lot of business
was closed down unnecessarily.”
And this: “It was completely unfair that
supermarkets could allow customers in, in a
controlled manner, but other businesses
weren't allowed. They made so much
revenue while other businesses suffer huge
loss.”
With all the criticism on this point during the
original lockdown, clearly some SMEs were
expecting a more targeted refinement of
alert level restrictions this time.
There were too many cases of delays in
granting firms exemptions to travel into
Auckland when its borders were closed.
Business had already gone through a
classification regime in April for the first
lockdown. Logically, reconfirming that status
should have been easy. But instead,
businesses had to go through the entire
application process again. The process took
too long. There were incidents of the MBIE
and the MOH contradicting each other –
one approving classification, the other
refusing it.
This from the owner of a Northland tech
SME frustrated with the cumbersome
system of determining which was and was
not an essential business: “They needed to
provide a national system /database of
essential service businesses or use existing
company numbers and provide various
categories defining levels of essential
businesses.”
And of course, there is that third of
respondents who are simply not convinced
any heavy restrictions are warranted:
“Prioritising a lockdown to fight COVID-19
undermines the economy, all other health
care issues and quality of life for years to
come.”
The conclusion is that if the Government
(either the Arderrn administration returned
to power or a new line-up) wants to retain
support for the Covid fight and widespread
compliance with restrictions, it needs to take
on board that SMEs want to see a far
greater degree of flexibility in any future
restrictions.
What the businesses are saying:
"The rules are clumsy at best.”
“I think the restrictions are necessary but
believe the size of businesses need to be
taken into account, for example I work alone
but could not operate in level 3 lock down
even with no customer access. “
“I agree with restrictions but think they need
to be better tailored to enable more
business to continue safely. Government
needs to be doing a bit more research and
using that to manage decision making. One
size fits all is not appropriate.”
“Businesses should be able to submit a safe
plan on how they can operate safely.”
“We get no advance notice ie if this and this
happen we will do this so no way to plan
your business or prepare. Secondly is clear
everyone is not playing the game as they
are tired and losing patience.”
“I do understand the need for restriction
levels, but I don't think there is enough
thought and planning going into setting
them, across industry sectors etc. The
Government could be doing a lot more in a
strategic sense to develop a plan that allows
some businesses to operate under certain
alert levels.
“There appears to have been incomplete
planning and execution in some key areas
of border testing, quarantine control and
testing, and lock down protocols. Primarily I
am concerned that transparent options on
how levels can be lowered and maintained
lower geographically, and within
demographic groups and business sectors
are needed.”
How long can we keep
doing this
There is an acceptance that with the
pandemic still raging overseas, we will
probably see more community outbreaks,
no matter how tight the border control.
This comes with a growing unease about
the long term viability of locking the country
down whenever an outbreak of Covid-19
occurs.
“We can't continue to go into lock-down
every time C-19 pops up - because it will.
We need to learn how to live with it and
keep vulnerable people safe,” this Auckland
SME owner said. The second outbreak has
“created a lack of confidence in businesses
making decisions for the future. Focus is
back on survival (or not). I'd have liked more
focus on how to avoid the spread (ie, good
hygiene, what to do if you feel unwell (ie,
stay home, how to access tests / help),
avoiding unnecessary travel, working from
home where possible. Comprehensive
comms to the communities where the virus
is active.”
And this owner of a Canterbury company: “I
feel good that most New Zealanders are
aware of and alert to the risks of the
pandemic. However, I’m becoming
increasingly concerned that this
Government doesn’t appear to have formed
a plan to resume some normality to trade,
both national/international as well as
tourism, whilst learning to live with a virus
that is not going to ‘disappear’, even with a
vaccine which could be two years away. We
can’t keep ‘hiding’.”
What business owners are saying:
“We need a better way of managing
community outbreaks that does impact, in
our case decimate, business revenue.”
Auckland maybe but wider nz needs to
operate without restrictions
“We need to pay more attention to the ways
in which the rest of the world is learning to
live with Covid, and my God, why are we
not investing in leading the way on
quarantine?? I am so concerned for the long
term outlook for New Zealand, we could
lead the way, we could pivot our tourism
and hosp businesses and we could recover,
but it seems we are frozen in a blind panic
again. This has to change.”
“We could use other measures to improve
our economy. I’d be happy for universities to
self isolate students, high income tourists to
be given self isolation. Special events
allowed in with self isolation.”
“A way forward needs to be planned
carefully to allow more freedom of
movement, because we simply cannot
continue locking down every time a case is
found. “
“Covid-19 is going to be with us indefinitely
so we are going to need to learn to operate
in a new normal. I believe the long term
damage of keeping small businesses reliant
on visitors (ie. retail & hospitality) is going to
be extremely wide-spread and the sooner
they begin opening the borders, the better
as it is going to take a long time to get
visitors traveling again.
“We can't escape this virus so best learn to
live with it before our economy dies as well.”
“It not only affected the economy for the
lockdown period but also confidence for the
future. Is this going to continue to happen?
We cannot eradicate it, we have to learn to
cope with it, to manage cases without
lockdown. We have to re-open the borders.”
“We cant live like this. My wife was
supposed to have a mammogram but this
has been cancelled so instead of saving
people with covid people will be dying of
breast cancer and other cancers that have
been missed.”
“I believe we need to protect our vulnerable
groups without locking down the whole
country. The long term impacts, both
economic and health wise will outweigh any
direct impact of Covid.”
“If the future involves lockdowns after a
handful of cases, the economy will be
destroyed and the mental health toll will be
far greater than that of Covid-19.”
How dow we rate
Government Support
The support measures the Government has
continued to roll out to target small
businesses have been welcomed by around
half SMEs, and are regarded as not good
enough by the other half.
Our August Prosper survey showed there is
almost a 50/50 split on SMEs who think the
Government has provided enough support
for the sector (49 yes, 51 no). This is a
slight lift from the 46 yes, 54 no in our June
survey results.
Whether they think the support packages
are adequate or not, businesses have been
taking up what’s on offer – 76 per cent of
our respondents said they have already or
intend to apply for some form of
Government assistance. Just 24 per cent
won’t.
“Our company would have struggled without
the support,” said this Canterbury owner.
“The initial wage subsidy has been
immensely helpful, as with the government
loan also when the only help we could
receive from our bank was a business loan
at 12.99 per cent interest,”said this Bay of
Plenty owner.
Criticism continues however that the
Government and its bureaucracy lack
sufficient depth of knowledge of the
complexity of running a business – more
support could have been provided, and
structured in a more palatable way. In
particular, the packaging of business
finance into loans has caused concern:
From a Nelson hospitality business: “The
Govt says it is doing heaps for small
business but all they have done is provide a
wage subsidy (which was good) but has not
gone far enough. The only other options
are loans for small businesses - what
business in their right mind would continue
borrowing without knowing what the
Government's plans for a resurgence are.
When does it stop?”
From an Auckland chiropractor: “The three
different wage subsidies have been an
incredibly welcome and helpful supplement
to receive. But for me as a sole trader with
no staff, it is only just enough to live on, as
it’s provided to me in that sense. But and it's
a big BUT, it is not enough to pay all the
due bills for my business as well. As a sole
trader there was nothing else to see me
through, no other relief I could access until
the small business loan via IRD became
available, which I took on as it allowed me
to pay my due and overdue bills. But I took
it on with great trepidation because of the
uncertainty of how this virus affects my
ability to practice and make a living. It kind
of feels like a heavy noose around my neck
knowing I have an obligation to start paying
it soon, not knowing if I'll be able to keep the
doors open the way things are now.”
And the owner of this B2B tech consultant:
“Most of the ‘benefits’ are based on
borrowing - which needs to be paid back.
Under current circumstances who has the
confidence to pay back? In my position I
know of some who have borrowed and are
now just hoping for the best.”
Calls have been made by our Prosper
survey respondents for the Government to
look at other measures to assist business,
from tax and GST relief, to more help with
rent, compliance costs and a cap on rates.
“While the wage subsidy was a huge relief ,
it is only one aspect of many a SME. Lease
agreements, rent and other outgoings can
drain resources of a SME very quickly and
these areas have not even been looked at
by the current government.”
“No help for business with major costs like
all the stock we had to dump, rent, fixed
electricity costs etc.”
“Rent assistance would have helped in the
Lockdown. The wage subsidy was great,
but I have had to borrow over $20k to cover
other expenses.”
“A ban on councils raising rates above 2019
levels would be a good start.”
A motelier in the BOP said the Government
should look to how Australia has managed
support packages: “My son owns a
business in NSW and he got an immediate
payout of $90,000 into his account and he is
still using that up now and has managed to
weather the storm with no real financial
impact and all staff still retained and
working. We are facing looming financial
hardship and having to go to arbitration to
get the landlord to negotiate on rent
reduction. Australia passed legislation
immediately on commercial rents.
Businesses were protected.”
Even when they are able to open,
businesses point out that they face extra
costs to comply with health and safety
requirements:
“One thing I think that hasn’t been
mentioned at all is the cost on businesses to
be able to keep trading. Eg the screens and
hand sanitizers. The special cleaners. The
signage to ensure everyone is following
restrictions and guidelines to keep everyone
safe. And then, the companies who charged
a disgusting amount of money for products
that were completely necessary and
impossible to get. Eg hand sanitiser. Face
masks etc, etc.”
“My earnings during the first lockdown were
$0.00 at level 4 and 3. At level 2 my income
was about 10 per cent of my usual income.
In fact, I think it actually cost me to open the
doors, given the added expense of hospital
grade disinfectants and PPE gear that we
must source and pay for our own.”
But countering that is a view by some that
the assistance cannot go on and some hard
choices face individual businesses:
“I would like more support but the govt can't
afford to keep propping up business.”
“The government can't keep giving out
money, it was nice to have the wage
subsidies, but businesses need to be finding
ways to continue without having to rely on
government support.”
“We all have to take responsibility in our
business and change how we operate to
make the most of the situation.”
“We have utilized all subsidy benefits we
can, we are now at a stage we must survive
on our own. We as a country cannot
continue to hand out capital on a never
ending basis; it is a time to sink or swim.”
“I have been around long enough to know
that those that are on the way out will go
and those that have a sound business will
stay and thrive (eventually). It is the way of
business.”

There is concern about how much

Government assistance will continue to flow
if we see further virus outbreaks and
restrictions applied. “If small business is the
backbone of a country then in times like this
we need sustained and ongoing support
especially financial,” said this Auckland
small manufacturer.
What businesses are saying about tax
relief
“It’s not so much about wage subsidies
which was an immediate bandaid, it’s all
about cash flow. So where is the GST
break, provisional and company tax etc?”
“GST and withholding tax being due at the
same time was a real strain on cash flow
made harder by Covid.”
“I feel that provisional tax should have been
'let go' for the next year so businesses could
use that money to 'survive' now. Paying tax
in advance is not easy if income for the next
year is going to be less.”
“Provisional tax is insane and grossly
unfair.”
“The lack of flexibility from IRD and
Customs on tax payments is an ongoing
issue. They behave in ways no company
would get away with.”
“Tax breaks would be good.”
“Support like the wage subsidy only covered
a third of the wage bill. And actually
equated to what we paid IRD the following
month for PAYE. The business loan we
were eligible for equated to approx 1.5 per
cent of our normal monthly turn over.”
The last word on Government support
comes from this Auckland consultant, who
takes us back to the fundamental issues of
how widespread lockdowns need to be and
why more businesses can’t be given
exemptions: “Ideally a large number of
businesses wouldn't have needed support if
a more sensible and consistent approach to
lockdowns had been taken.”
The extent of job cuts
The wage subsidy continues to be by far the
most significant package of Government
assistance that SMEs have taken up. In
June 74 per cent of survey respondents
hada accessed it for staff. In August 82 per
cent had used it.
“The wage subsidy has saved our family. It
gave us the breathing space to start
hustling, 'pivoting' and coming up with new
ways to do business.”
But the loss of jobs continues.
In our June survey, 32 per cent of
responding businesses said they had
reduced staff numbers.
Now, in our latest survey, 44 per cent have
let staff go.
Digging into those numbers:
19 per cent have reduced numbers but are
stable now and won’t let anymore go.
15 per cent however have reduced staff
already and intend to let more go.
11 per cent had not reduced any staff until
now, but feel forced to now.
The cuts to the workforces of those SMEs
are deep in some cases: 15 per cent of
responding firms have cut from three
quarters to all their staff, 56 per cent have
cut up to a quarter.
Of those SMEs that are cutting jobs, 54 per
cent say the end of the wage subsidy for
them is a factor in that decision.
However another 46 per cent say
regardless of the wage subsidy, they are
cutting jobs.
This Canterbury retailer provides an
example of how businesses are having to
balance staffing needs: “We were growing
our business, but have now had to scale
back. Know lots of businesses holding off
employing more staff because of the
uncertainty, instead offering overtime to
existing staff and making do.”
If we are looking for a silver lining – and it is
a good one – a strong 44 per cent of our
survey respondents say they have not yet
reduced staff numbers and don’t intend to.
There are more than 10 per cent of our
responding SMEs that actually intend to hire
more staff.
There was also some cynicism that the
extensions to the original wage subsidy
were adjusted to specifically exclude
business and protect the Government from
more large scale payments.
“The second (and third) wage subsidies
were cleverly structured so that very few
businesses qualified once they re-opened in
April/May.”
“Requiring a 40 per cent revenue decrease
is in many cases too high a threshold for
businesses to thrive. It doesn't account for
higher costs in say hospitality in having to
maintain social distancing, rental issues,
and the requirement to still pay GST.”
And there were those who saw the subsidy
as an extra administrative burden on their
business.
“Government is using business as a welfare
payer.”
“To say the wage subsidy is for businesses
is really an exaggeration. Its effectively a
benefit for employees filtered through a
business to stop them from needing to
make roles redundant. The subsidy goes to
the employee; it doesn't help a business pay
rent or power or other opex expenses. And
to say it's "12 weeks" or the like is also not
true. If you are a business like us where
most staff are paid $26-$32 an hour and
you are topping up to 80 per cent, it doesn't
last anywhere near this long.``
“We were forced to close, we could not
operate and the only support we received
was ~$500 per week per employee. The
government has leveraged small business
to act as the social intermediary. It's a lot
cheaper for small business to carry the
burden of Covid, than to use established
government organisations such as the
ministry of social development.”
ONLINE
One of the most significant impacts of the
Covid lockdowns, predicted to become a
long term trend, is the adoption of greater
online buying by New Zealanders.
A recent retail report showed a year on year
increase in online spending here of 27 per
cent. Leading the growth rates have been
the Furniture, Housewares, and Hardware
category, with spending up 93 per cent in
August last year. The Groceries and Liquor
category also performed strongly up 20 per
cent.
In our Prosper survey 42 per cent of
responding SMEs already made online
sales before the Covid-19 restrictions.
But another 18 per cent say they have now
rapidly moved into online sales or
conducting business online as a direct result
of Covid-19.
This Wellington business owner is one who
fast tracked an online approach: “I have a
second business which does sell online,
and that has done well in this period. We’ve
adapted significantly in our first business,
but it may not be enough as new projects
are slow to get going again, and every
project we had on our books at lockdown #1
was stopped. We came up with a clever
online solution for hospitality for level 3, and
Government backing of that frankly saved
us. We’ve adapted quickly to working from
home, we’ve explored all kinds of other
options, but our main line of work has dried
up. It may not be survivable, but a few of us
will switch our focus to our upcoming
business.”
Worryingly however, of those businesses
who are still not using online sales, the
majority (86 per cent) say they don’t
because of the nature of their business.
What they are saying is that they are locked
into their current operating structure and
cannot see any option to create some sort
of online offering. This is an issue that
needs addressing.
KEY TAKEAWAYS
SME business confidence is slowly but
gradually firming despite the Covid-19
setbacks. Businesses are getting used to
the new normal and how to operate.
Despite the blow of a second community
outbreak, there remains broad backing for a
go-hard approach to eliminating Covid-19 in
New Zealand instead of a ‘learn to live with
it’ attitude.
Businesses want the Government to lift its
game however in how it applies any future
restrictions. Greater regional flexibility in
restrictions, smarter contact tracing and
allowing more businesses to trade are
wanted.
SMEs say Government support packages
structured to force them to take on more
debt are challenging when cash flow
remains uncertain. There are calls for tax
relief and more help on rents, leases and
mortgages.
For now, job losses are decreasing as many
SMEs have trimmed and adapted to the
new normal.
Digital commerce is still lagging however,
with too many businesses unable to think
beyond their current operating structure.
METHODOLOGY
This was an online, self-selecting survey,
conducted over 22 days during the second
round of Level 3 restrictions and then 2.5 in
Auckland and Level 2 in the rest of the
country from Wednesday August 26 to
Tuesday September 15.
The target audience was small to medium
business owners. There were 1902
respondents.
It was run by Prosper, the specialist section
of Stuff dedicated to supporting our small
businesses.
Prosper brings information and expert
advice on how small businesses can
recover, survive, and thrive.
Prosper talks about how to identify new
opportunities post-lockdown, adapt your
sales strategies, beef up your online
presence and take advantage of tax relief
options.
We have plenty of inspiring examples of
how other businesses are managing to
prosper.
Check out Prosper to find the information
and advice you need and sign up to our
newsletter.