While many of us were envisioning 2022 would be the year of resetting into a ‘new normal’, the rapid spread of Omicron has held small businesses back as they face ongoing challenges. Xero’s Small Business Insights (XSBI) data for the months of December and January shows Omicron has disrupted many workplaces and businesses across Australia and the UK, while New Zealand was able to remain relatively steady.
Since November, when the Omicron wave first hit, Australia, New Zealand and the UK have all seen a decline in their Small Business Index – a key indicator of the sector’s health. Over the past two months, we can see a clear difference in small business jobs between the UK and Australia where Omicron hit hard, and New Zealand where Omicron had not yet spread significantly.
Omicron causes workforce challenges for small businesses
As the new year began, rising COVID-19 cases in the UK and Australia created challenges for small business owners as they tried to fill shifts with a shrinking pool of available staff. In Australia, jobs declined 1.5 percent year-on-year (y/y) in January, compared to a rise of 1 percent y/y in December. Spikes in cases across the country, isolation requirements and summer holidays resulted in fewer people working.
Jobs in the UK are struggling to recover, with a 3.2 percent y/y fall in small business employment in January, and significant drops in hospitality (-12.1% y/y) and manufacturing (-6.8% y/y). These figures are adjusted to account for low pandemic-impacted results in January 2021.
UK small businesses fighting for recovery
Small businesses in the UK are doing it tough right now, with the challenge of a shrinking labour force, the ongoing impacts of Brexit and the pandemic, as well as rising cost of living pressures. The latest XSBI data showed a rise in the time small businesses are waiting to be paid, rising by 1.9 days in January to 30.8 days. Cash flow is the greatest challenge for small businesses, and late payments are setting struggling businesses back further.
Further action is needed to help British businesses kickstart the economy and job growth. We’ve identified the key areas small businesses need greater support to rebuild, as well as a number of recommendations to create the right climate for small businesses to thrive in our report, The Road to Small Business Recovery.
Sales growth in Australia and New Zealand slows
Australia experienced two months of strong sales growth as people spent over the festive season. However, sales slowed in January to 5.7 percent y/y, the biggest drops being in hospitality (-7.5% y/y) and retail (0.7% y/y), reflecting the challenges of operating in a close contact environment during an outbreak.
In New Zealand, small business sales slowed to 4.6 percent y/y in January after two months of double digit sales growth as people celebrated coming out of lockdown late last year. Cases in January did not rise to the point of causing widespread workforce disruption, so many people were able to go to work and shop at nearby businesses. Kiwi small businesses are in a position to learn from what has happened overseas and be better prepared to manage potential workforce shortages.
Looking ahead with optimism, despite tough conditions
As governments moved away from implementing lockdowns, small businesses were hopeful for 2022. However Omicron began to spread into communities, creating more challenges for small businesses, from staff shortages to reduced cash flow and temporary closures from not having enough staff to operate. The small businesses in our communities need our support more than ever to make it through this turbulent time.
The data from December and January reflects the tough conditions created by Omicron, but also the summer holiday period for the Southern Hemisphere – a quiet trading time for many businesses. Xero’s data tells us that small businesses can bounce back from tough times, and as restrictions ease, case numbers fall and travel returns, I’m optimistic small businesses will get through this.
To learn more about Xero’s Small Business Insights visit the XSBI homepage.