'Lockdowns are killing us': Call for clarity on vaccine target

Wednesday, 15 September 2021

Businesses are calling for clarity about the path ahead and more support for those that cannot operate at all if lockdowns continue.

The chairman of accounting and business advisory network Baker Tilly Staples Rodway, David Searle, said his team was talking to clients regularly in Auckland who were feeling increasingly uncertain the longer lockdown continued.

“We have got an awful lot of clients, a lot of businesses that are completely shut and only relying on the resurgence support payment and wage subsidy.”

He said a shift to level 3 so they could operate in a safe click-and-collect environment was “hugely important”.

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Mat Jorgensen says about $1 of a $10 beer is profit.

But mixed signals about the strategy from here were difficult for businesses to cope with, he said.

He called for a clear vaccination target and timeline to reopen borders – “acknowledging that Covid-19 will be with us for the long haul and that there will be different rules for the vaccinated”.

He said the focus should be on vaccinating as many people as possible. “It was pleasing that the prime minister said we can’t rely on lockdowns forever. We would like to have some certainty – what is the number we need to get to, what are the timelines? It is very difficult to plan on when we might bring additional resources into the company without some timeline.

“I can’t understand why we can’t get a timeline – we can extrapolate the vaccine roll-out and put some conservatism in there.”

Mat Jorgensen, director of Infinity Nightclub and Ding Dong Lounge in Auckland, said his industry had adjusted to things like social distancing and mask wearing and it was now the lockdowns that were killing it.

He said there should be more targeted support for businesses that could not operate at level 4.

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The wage subsidy is available to businesses with a revenue drop of 40 per cent, and the resurgence support payment to those with a drop of 30 per cent, but he said there was a big difference between that drop and a 100 per cent reduction, which the current system did not recognise.

He said it took eight or 10 weeks to recover the cost of one week closed.

“This is because firstly, hospitality businesses don’t make as much money as you think they do and secondly because we have large fixed outgoing costs we can’t escape. Decent bars and restaurants aim to make around 10 per cent profit.

“So, of the $10 you pay for your beer $9 goes into paying our various costs and $1 is profit. But that $1’s job is not yet done. It doesn’t go straight into the Lamborghini fund as some may think but it gets kept around as a rainy-day fund. My two bars for example, lose money every week from mid-December until late January. Also, long weekends are another business killer for me and need to be financially planned for. We use the $1s we have kept aside for the ability to keep running at a loss.

“The $1s also get used for a reasonably major facelift every three-to-five years to keep our product interesting to the customer. Most rainy-day funds dried up mid-way through 2020, and the bars and restaurants that have stayed going have done so by large borrowing or by selling assets, the family house in my case.”

He said the industry believed in lockdowns as a health response but they had had a catastrophic effect on its businesses, while other sectors could still “tick along”.

“The subsidy is useful to hospitality businesses to guarantee staff employment ready for when levels drop but is not nearly as empowering as for most other businesses that can both earn money during lockdown and gain utility from their staff in lockdown.

“I believe a separate tier of targeted support should be considered for businesses that lose most or all their turnover during lockdowns. As I have said, lockdowns have been and probably will continue to be a major part in the way New Zealand deals with Covid.

“For the most part it has been working well and has allowed New Zealand to benefit from a much more normal lifestyle than most of the world. The cost of doing this has not been evenly shared. What I am asking for is for the businesses that bear the brunt of lockdown to be treated differently from businesses that fare much better. I am also asking for people to think about the hospitality industry, and how important it is for New Zealand and New Zealanders.”

Searle said there was also a risk of exporters losing business if New Zealand was closed while other countries were open.

“If you are a supplier to overseas and you are shut at the moment – if you have not been able to supply those overseas people, I would expect they may look for alternative sources of supply. Being shut when the rest of the world is open is a dangerous predicament to be in.”

Businesses in other parts of the country that needed supplies from Auckland were also hamstrung, he said. “It is incredibly important that we can get business moving again in a safe fashion, with some view of certainty. Give us a timeline or a vaccination rate that we need to hit. I think that incentivises people to get out and do it.”