Media releasePublished on 30 September 2021

Data shows initial impact of snap lockdown on New Zealand small businesses

Small business sales down across most industries following Alert Level Four announcement

Wellington — 30 September, 2021 — Xero, the global small business platform, today released its Xero Small Business Index for August 2021, showing the initial impacts of the Delta lockdown off the back of months of sustained growth.

Xero’s Managing Director for New Zealand & Pacific Islands, Craig Hudson, says while the full impact of the Alert Level Four lockdown can’t be measured until September’s data is available, we can see small businesses were performing strongly until the mid-August lockdown.

“Moving into lockdown is always going to impact the small business community, especially those in the hospitality, retail and construction industries. But, it’s encouraging to see how well the small business economy was performing going into the lockdown.”

“GDP data showed a rise of 2.8 percent in the June 2021 quarter, following a 1.4 percent increase in the March 2021 quarter. Of course, the reality is now vastly different for many small businesses across Aotearoa,” says Hudson.

Immediate impact on small business sales

While the Alert Level Four lockdown was in place for only part of the month (18-31 August), the effects on sales were felt immediately. Small business sales rose just 0.4% year-on-year (y/y) in August 2021, 1 sharply down from 8.2% y/y growth in July.

Hudson added, “Sales growth was least impacted in those industries that can work from home such as professional services (+2.7% y/y).”

“But those industries where working from home is not an option saw dramatic slowdowns including hospitality (-9.8% y/y), manufacturing (-3.2% y/y) and construction (-0.1% y/y).”

Employment remains relatively stable

Small business jobs rose 5.6% y/y in August 2021, up from 5.2% y/y in July 2021. “This marks the fourth month in a row of jobs growth exceeding 5% y/y. However, the September data will give a much clearer picture of how impacted jobs have been by the return to higher Alert Levels, especially in Auckland,” says Hudson.

Across industries, job gains in August continued to be led by manufacturing (+8.3% y/y), professional services (+7.4% y/y) and construction (+7.2 % y/y).

These figures point towards a more prepared small business community, which adapted to operating in lockdown conditions to maintain cash flow. Next month’s data will give us insight into how small business employment handles prolonged lockdowns,

Craig Hudson

“These figures point towards a more prepared small business community, which adapted to operating in lockdown conditions to maintain cash flow. Next month’s data will give us insight into how small business employment handles prolonged lockdowns,” says Hudson.

How does delta impact small business recovery?

Hudson says we can get an idea of how the long tail of Delta impacts the recovery of small business economies by looking internationally - especially to Australia.

By the end of August around 60% of the Australian population was living under stay-at-home orders due to ongoing COVID-19 outbreaks, although the restriction orders differed in New Zealand.

Hudson adds, “Looking to our Australian neighbours, small business jobs rose just 1.3% y/y in August 2021. This marks a continuing slowdown from July (+2.4% y/y) and June (+4.5% y/y) and is the slowest pace of jobs growth since October 2020.”

“However, sales rose 6.4% y/y, up from the July result of +4.2% y/y. This is a solid result considering the extent of lockdowns in August and points to the adaptability of small businesses during these difficult trading periods. “

While Australia’s states have been moving in and out of lockdowns for a longer period of time, we’re seeing small business owners adapt to these new trading circumstances. “

As Auckland remains in Alert Level Three and the remainder of New Zealand remains in Alert Level Two, it is imperative we support our small business owners through this period. While everyone is quick to get takeaways, spare a thought for your local butchers, florists and retail stores.

“For those who can, now’s the time to prioritize spending with small and local businesses and to help them return to relative normality as soon as possible as every dollar is so meaningful right now,” says Hudson.

From August, we are now sharing regional and industry splits on our public website. This data will go back to January 2017 for all the industries and regions we have sufficient sample size for.

1 Typically, the Index compares year-on-year (y/y) data to reveal how the small business economy is faring. However, as the data from August 2020 was significantly impacted by the pandemic, all comparisons in this release have been made using annualised two-year growth to account for base effects.

ENDS

Media Contact

Natalie Benning | natalie.benning@xero.com | 021 026 19604

About Xero

Xero is a cloud-based accounting software platform for small businesses with over 2.7 million subscribers globally. Through Xero, small business owners and their advisors have access to real-time financial data any time, anywhere and on any device. Xero offers an ecosystem of over 1,000 third-party apps and 300 plus connections to banks and other financial partners. In 2020 and 2021, Xero was included in the Bloomberg Gender-Equality Index and in 2020, Xero was recognised by IDC MarketScape as a leader in its worldwide SaaS and cloud-enabled small business finance and accounting applications vendor assessment.

About Xero Small Business Insights

The Xero Small Business Insights (XSBI) program provides analysis of the sector’s health, with metrics based on anonymised, aggregated data drawn from hundreds of thousands of subscribers in partnership with AlphaBeta Australia (part of Accenture). The result is a picture of business conditions that’s more accurate than most private surveys, which have a far smaller sample size, and more frequently updated than other New Zealand data on small business. Xero is currently producing a series of specialized monthly metrics which analyze the impact of COVID-19 on the small business sector.

About Accenture

Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions — underpinned by the world’s largest delivery network — Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders.

Note to the editor

Previous iterations of the XSBI data have listed snapshots of data from the time it was captured. Some of these historical data points change as bookkeepers and accountants finalize their clients’ accounts, which can impact the specifics of the percentages.

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