The Small Business Index fell to 97 points (slightly below average) across December and January, ending a run of three consecutive months with above average scores in the 100s.
Xero’s Managing Director for New Zealand & Pacific Islands, Craig Hudson, says the Index downturn is largely due to small business sales, which slowed to 4.6 percent year-on-year (y/y) in January after several strong months as lockdown restrictions ended.
“November and December saw double digit sales growth as Auckland emerged from the Delta lockdown, with businesses able to begin reopening, and Kiwis encouraged to spend locally to help small business recovery,” says Hudson.
Despite slower performance over January compared to previous months, job growth remained above average levels at 4.1 percent y/y with wage growth also up 3.8 percent y/y, following several strong months.
International Omicron lessons
While Aotearoa’s Small Business Index remains close to average, this is in contrast to Australia and the United Kingdom, which reported Indexes of 86 and 85 respectively as widespread Omicron outbreaks negatively impacted small business operations.
Small Business Index international comparison
Furthermore, COVID-related disruption has had a major impact on jobs in Australia (-1.5% y/y) and the UK (-3.2% y/y adjusted for base effects), but this hasn’t hit Aotearoa yet (4.1% y/y).
“The international data is a warning of potential things to come for New Zealand businesses. The small business economy in Australia was significantly impacted by Omicron earlier in January, with rising cases and required isolation periods resulting in fewer people being able to work,” says Hudson.
“With Omicron forcing Aotearoa into Red on 23 January, this data set only captures about a week of the direct impact Omicron was starting to have on the community.”
With cases now at record highs and daily numbers in the thousands, small businesses will be facing some of the biggest challenges they’ve confronted during the pandemic.
“As Omicron continues to move through the community, small business owners will face staff shortages due to employees needing to isolate, reduced cash flow, and potential temporary closure if their workspace can’t be used or their entire workforce is taken out,” says Hudson.
“We need to be doing everything we can to support local business in these times. As always, shopping local when possible will help support small businesses, as well as following COVID restrictions to help reduce the spread of the virus.
“Australia and other global markets didn't get the opportunity to prepare for Omicron. We’re in a position to learn from what has happened overseas and be better prepared for the worst of this outbreak.”
Xero is a cloud-based accounting software platform for small businesses with over 3 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. For three consecutive years (2020-2022), Xero has been included in the Bloomberg Gender-Equality Index. In 2021, Xero was included in the Dow Jones Sustainability Index (DJSI), powered by the S&P Global Corporate Sustainability Assessment and in 2020, Xero was recognized by IDC MarketScape as a leader in its worldwide SaaS and cloud-enabled small business finance and accounting applications vendor assessment.
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