Recovery from Covid-19 continues for SMEs but hospitality down on this time last year

Thursday, 17 December 2020

Edmundo Farrera, owner of La Fuente, a wine bar and mezcal in central Auckland, says two lockdowns and a Covid scare in an apartment in the Auckland city centre has made trade unpredictable and inconsistent.

Small businesses’ revenue has grown six months in a row although hospitality businesses are still struggling, Kiwi accounting technology company Xero says.

Xero’s Small Business Insights for November shows small business revenue growth of 3.2 per cent in November 2020 compared with November 2019, with most industries and regions enjoying growth.

For the last six months revenue in small businesses has grown each month when compared to the same month the year before.

However, the rate of revenue growth for small businesses is slower than pre-Covid, Xero said.

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Revenues for hospitality small businesses were 8 per cent lower in November 2020 than in November 2019, Xero says.

* Small business employment rebounds past pre-Covid levels

* Small businesses are recovering and growing but jobs still down on pre-Covid numbers

Edmundo Farrera, owner of La Fuente bar, has retained all his staff even if trade is up and down.

* Small businesses doing better last month than a year ago, despite Covid-19

Across the board, all industries in New Zealand, except for hospitality, saw an increase in revenue in November.

Revenues for hospitality small businesses were 8 per cent lower than a year ago and jobs in hospitality small businesses were 8.5 per cent lower than pre-crisis levels in March 2020.

Most other industries enjoyed growth in November, led by rental, hiring and real estate of 9.6 per cent, manufacturing with 8.6 per cent, construction 7.7 per cent and retail 4.3 per cent.

Hospitality was the only industry that had not experienced a meaningful recovery of jobs from those lost at the height of lockdown in April, Xero said.

La Fuente, a wine and mezcal bar and shop, serving Mexican food and located in the Auckland city centre, is recovering but trading is a lot less predictable and consistent after two lockdowns and a Covid-19 scare in an apartment in the city centre.

Business owner Edmundo Farrera said its trading revenues were returning to almost the same as this time last year but managing the business was trickier.

”We used to be very steady, we used to be busy every day, and we used to be easy to manage in terms of how many staff you put on the floor.”

But not now.

Xero managing director for New Zealand & Pacific Islands, Craig Hudson, says many small businesses are returning to “relative normality”.

”We put on extra staff and no one comes on theoretically busy days. And then on theoretically quiet days I’m by myself and I get slammed, and then we don’t provide the service we like to provide.”

Fridays used to be very busy but since the last call from the Government to close central Auckland Friday has become one of its quietest days. However, places like Ponsonby and K-Road were a lot busier. It seemed some Aucklanders were avoiding the central city.

He had kept the same amount of staff. He and his wife made the decision to support staff with a 30-hour week, so they could eat and pay the rent and do the basics.

That had also worked for the business because when the bar was really busy the team worked very hard.

Unlike hospitality, in other industries job numbers were rising. In November, small business jobs rose 2.4 per cent and were now 3.2 per cent above pre-crisis levels, Xero said.

The upswing was due to seasonal trends, such as extra retail staff for the Christmas rush and increased work in the agricultural sector.

Manufacturing led the way with jobs now 10 per cent above pre-crisis levels, followed by real estate and retail at 6.7 per cent, construction at 5 per cent and professional services at 2.7 per cent.

Xero’s managing director for New Zealand & Pacific Islands, Craig Hudson, said the consistent year-on-year growth in revenue (comparing the month with the month a year earlier) for six months in a row told an encouraging story of much of Aotearoa’s small business sector returning to “relative normality”.

It was a testament to Kiwis supporting local business and to the hard work of small business owners and employees.

“They’ve hustled to revive their businesses in the face of tough economic conditions,” Hudson said.

November's data showed Australian small businesses were enjoying growth also, but not as much as Kiwi small businesses, with revenue 1.7 per cent above the levels they were last year while in the United Kingdom small businesses continued to struggle with revenue down 7.9 per cent.