Small businesses are running on fumes this lockdown, with many having exhausted almost all their cash reserves over the past year and a half.
Xero's monthly look at small businesses, showed they were growing along with the wider economy prior to the nationwide level 4 restrictions. Photo: 123RF
Accounting software provider Xero's monthly look at small businesses, showed they were growing along with the wider economy prior to the nationwide level 4 restrictions.
Sales rose 6.6 percent year-on-year, while jobs grew 5.3 percent, and they were outperforming similar sized firms in Australia, but that growth is expected to slow significantly during the latest level-4 lockdown.
Xero New Zealand manager Craig Hudson said past data indicated there could be a V shaped recovery.
However he said the difference this time is small businesses have not had time to rebuild their cash reserves since last year's lockdowns, meaning some are in for a rough time.
"Cash reserves are definitely incredibly low if not non-existent from the small businesses that we're connected with. We don't have the data on that, but it's definitely anecdotally yes. "
"You look at how they've been able to get through wage subsidies retaining staff, but there is still a good number of fixed costs that are still having to go out every month for small business... wages are a subset of the overall costs of keeping a business afloat," Hudson said.
He said once again the retail and hospitality sectors would be hit hard by the lockdown.
Lessons also needed to be learned from 2020 on how the economy can recover as quickly as possible.
"Short, sharp lockdowns are essential to getting businesses' doors back open, while purchasing locally where possible will help small businesses recover and get back to the levels of growth we've seen in recent months quickly," Hudson said.
But looking back to July, the index highlighted the consistency of New Zealand's recovery prior to the fresh lockdown.
"Even sectors that have taken longer to rebuild, such as hospitality, have been able to maintain several months of positive sales growth which is now translating into jobs growth," he said.
"Looking at the small business economy in July, it's clear Kiwis were making an effort to support local business owners and their communities. While the Index fell slightly, we're still tracking well above average," Hudson said.