How July COVID lockdowns have hit Australia’s small businesses
Xero’s Small Business Index fell 41 points to 101 points in July 2021, dropping to its lowest result since December 2020.
- Xero’s Small Business Index fell 41 points to 101 points in July 2021.
- NSW saw a decline in sales, with a decrease of 0.3% year-on-year.
- The time it took small businesses to be paid by suppliers rose by 2.8 days to 23.3 days.
By Hannah Tattersall
Xero has released data showing how COVID lockdowns affected Australia’s small businesses in July 2021.
Data from the Xero Small Business Index is based on aggregated and anonymised transactions from hundreds of thousands of small businesses across Australia and was produced in partnership with professional services company Accenture.
Looking at metrics such as sales, time to be paid, jobs and wages, the Index fell 41 points to 101 points in July, reaching its lowest result since December 2020.
Restrictions in Greater Sydney over the entire month of July affected almost 25% of Australia's population, while Victoria’s lockdown – from 15-27 July – and South Australia’s lockdown from 20-27 July, had less of an effect on the performance of small businesses in those states.
Sales decline in NSW
While every state in Australia experienced slower sales growth in July, NSW was the only state to see a decline in sales, with a decrease of 0.3% year-on-year, following an increase of 11.1% year-on-year in June.
Victoria experienced two-week lockdowns in June and July, yet July’s sales growth of +4.4% year-on-year (adjusted) was much slower from the June figures of +10.1% year-on-year (adjusted).
The week-long lockdown in South Australia also led to softer sales growth of +1.5% year-on-year in July, compared to +11.4% year-on-year in June.
The hardest hit sectors in July were hospitality and arts and recreation, falling 6.5% and 9.2% year-on-year, respectively, according to the data. The information media and telecommunications sector also saw a fall in sales in the year to July (-0.2% year-on-year).
“The hardest hit sectors in July were hospitality and arts and recreation, falling 6.5% and 9.2% year-on-year, respectively.”
Greater Sydney’s first ban on construction activity in the final two weeks of July most likely contributed to weak sales growth in the construction sector of +2.4% (adjusted), down from +12.5% year-on-year in June.
Time to be paid extends
The Index shows the time it took small businesses to be paid by suppliers rose by 2.8 days to 23.3 days in July. This reverses its fall to record lows of 20.5 days in June.
New Zealand and the UK saw a similar trend at the end of their financial years in March, according to the data.
The late payments measure also reversed its June decline to a record low of 5.1 days, bouncing back to 6.7 days in July. This is broadly in line with data from the past 12 months and means that small businesses are being paid almost a week late on average.
Small business jobs continue to soften
The Index reveals small business jobs rose 2.6% year-on-year in July 2021, a softening in jobs growth compared to June (+4.4% % year-on-year) and May (+5.9% % year-on-year) and the slowest jobs growth since February 2021.
Given the stay-at-home restrictions across Greater Sydney and Victoria, NSW (+0.4% year-on-year) and Victoria (+2.7% year-on-year) recorded the weakest jobs growth of the states. In contrast, jobs in Western Australia rose 6.7% year-on-year.
The sectors hardest hit by the lockdowns were arts and recreation and hospitality, with jobs falling 3.5% and 3.2% year-on-year, as many businesses were forced to close once again.
Small business wages growth broadly steady
Wages in small business, as measured by average employee hourly earnings, rose 2.6% year-on-year (adjusted). This was almost the same as June’s 2.7% year-on-year rise and still down on the pre-pandemic pace of growth around 3%.
To read Xero’s full July results, and to download the data, click here.
The impact of the August lockdowns on small businesses will be assessed in the next monthly update to be released in late September.