Lack of change by many small businesses after Covid called 'deeply troubling'
It’s “deeply troubling” that a quarter of New Zealand’s small businesses made no major changes as a result of the coronavirus pandemic, says the New Zealand head of an international accounting organisation.
New Zealand’s small businesses ranked last out of 11 markets for earning revenue in online sales last year, according to a survey of small businesses across the Asia-Pacific by CPA Australia.
New Zealand’s small business growth also underperformed, ranking third-worst behind Australia and Hong Kong.
Overall, nearly two-thirds of small businesses felt a negative impact from Covid-19, said CPA Australia New Zealand head Rick Jones.
* New Zealand's tech sector even stronger after death threat
* New Zealand's economy is a housing market with bits tacked on
* Strict lending criteria forcing small firms to jump through more hoops than ever
“Covid has certainly heightened the vulnerability that NZ small businesses have had, and the chickens have come home to roost in the last 12 months.
“The small businesses that we surveyed, it’s the worst in terms of the confidence that businesses have for the 12 months ahead since the survey began,” Jones said.
The CPA Australia small business survey has run for 11 years, and over that time New Zealand’s small businesses have consistently lagged others in the region for their investment in innovation and participation in the digital economy.
If anything was going to shake New Zealand businesses out of their “e-commerce complacency”, it would be Covid-19, Jones said.
“It is deeply troubling that a quarter of all businesses made no major changes to their business as a result of the pandemic, the third worst result across the surveyed Asia-Pacific markets, and only 9.3 per cent reported an increase in focus on online sales.”
Last year, many companies suffered because of their limited use of social media, lack of involvement in exporting, and a lack of investment in innovation and technology. Companies that were more plugged into the digital economy did better than others, Jones said.
“This shows how vulnerable New Zealand businesses are to economic shocks like Covid, because of their lack of participation in the digital economy.”
Only 29 per cent of New Zealand small businesses reported growth last year, compared with 49 per cent in 2019. In contrast, the average growth rate for small businesses across the region was 46 per cent in 2020, down from 65 per cent a year earlier.
Only 44 per cent of New Zealand small businesses expected to grow this year, down 27 per cent on last year.
The impacts of Covid-19 on small businesses were worse than the effects of the Global Financial Crisis, Jones said.
Significant investment was needed in the digital economy in New Zealand, both by businesses themselves and by the Government, which needed to provide funding and education.
“A lot of small businesses have taken up Government support over the last 12 months, but I’d like to see some clear and concise measures with timelines to help these small businesses further participate in the digital economy.”
The pandemic would have an effect on the economic health of New Zealand’s small businesses throughout 2021, he said.
The Government wage subsidy helped keep employees in work and employers in business after Covid-19 hit last year, but there have been signs of mounting difficulties for companies.
The number of businesses closing started to climb at the end of the year, after a year of expansion. And trading became tougher for small businesses at the start of this year, with monthly revenue falling in January for the first time in seven months, according to Xero.
The latest figures from Stats NZ showed a surprisingly large 1 per cent drop in gross domestic product for the last three months of 2020, a sign of weakening business activity which cast some doubt on the performance of the New Zealand economy. The Reserve Bank has also warned that the economic outlook was “highly uncertain”.