Targeted financial relief welcomed but still room for more support for New Zealand's SMEs

14 May 2020

Leading business platform provider, MYOB, says many of New Zealand’s SMEs will be relieved the Government has recognised their ongoing struggles with the effects of COVID-19, with the extension of the wage subsidy announced in today’s 2020 Budget.

The Government today announced a $50 billion spending package, including a $3.2 billion eight-week extension of the wage subsidy scheme, targeted to support businesses which have seen or expect a 50% loss in revenue, as well as a $3 billion infrastructure investment and $1.6 billion on trades and training. $10m will also go towards helping more of the nation’s SMEs digitise.

MYOB New Zealand Country Manager, Ingrid Cronin-Knight, says the spending package will provide crucial support to many businesses across a range of sectors, helping them maintain staffing levels and provide greater certainty around their finances and operations for the coming months.

“Around the country, SMEs are preparing for a long winter ahead. As they navigate ongoing restrictions and face falling consumer confidence, having the subsidy extended will provide some breathing room – allowing them to continue trading, look at new opportunities and protect their staff,” says Ingrid Cronin-Knight.

“SMEs in the tourism industry will also be pleased to see a targeted investment of $400 million, including a domestic marketing campaign, to address the critical needs the sector faces – a positive first step.”

SMEs seeking broader change
However, while the 2020 Budget package will shore up businesses in the short term, Ms Cronin-Knight says with $20 billion still to be allocated from the recovery plan, the Government should also consider how the country’s SMEs can be better integrated into the whole economy over the longer term.

“The experience of the last seven weeks has underscored how vital our SMEs are to New Zealand,” explains Ingrid. “From delivering essential items to our homes, to keeping a large number of Kiwis in work, local SMEs from all corners of New Zealand have played a major role in keeping our economy ticking over and our communities supported.

“But now we need to make sure these businesses have every opportunity to participate in the recovery – and are given the tools to do so.”

Ms Cronin-Knight says the $10m in funding support for SMEs to improve their e-commerce offering as well as looking at incentives and grants to encourage e-commerce adoption is a good start.

“Capital for SMEs is scant right now and we have seen over recent weeks, the SMEs who were able to manage their business remotely – even at a reduced capacity - have been able to maintain a degree of cashflow. Giving more businesses financial support to help digitise their operations is a step in the right direction.”

However, another way in which SMEs could be incorporated further in economic developments from today’s 2020 Budget is to provide them with the opportunity to participate in the Government’s major infrastructure projects. This includes ensuring SME involvement in the ‘shovel-ready’ projects which will receive a $3 billion investment by the Government as it seeks to boost economic recovery.

Access to finance

As part of its recovery programme, the Government had earlier announced the Small Business Cash Flow scheme, which is estimated to cost up to $7 billion.

“While this is a short-term scheme, providing SMEs with access to finance to enable them to start, survive and succeed, is critical to the future of our economy,” says Ms Cronin-Knight.

“With $426 million provided to 25,000 businesses over the last 48 hours through the Government’s Small Business Cash Flow Loan programme, it is clear there is a real need to address how both the public and private sector can better provide access to finance for SMEs over the longer term.”

“According to our latest MYOB Business Monitor, currently a third of SMEs struggle to access finance and just over a third of SMEs have never tried to raise business finance. This is limiting their ability to grow, often sees them miss out on valuable opportunities, and can mean they fall back on private funding sources.”

Focus on technology

“As well as playing a role in the building of our physical infrastructure, having better access to our digital infrastructure will also help our SME sector play a greater role in our economy,” Ms Cronin-Knight says.

“As we’ve seen over recent weeks, SMEs that have access to a range of digital tools and resources were better positioned to manage the disruption caused by the lockdown.”

“To support them, SMEs across the country need access to reliable, high-speed broadband and cellular connections. This has a huge impact on business productivity and is particularly critical for SMEs operating in remote or regional areas. A financial boost to increase the pace of the network roll-out by the Rural Connectivity Group will help achieve this goal faster.”

“At the same time, targeted tax deductions for businesses making software purchases would incentivise more investment in technology, and could be supported through additional training to ensure SMEs and their employees are ready for the future of work.”

Training and R&D

While the 2020 Budget delivered positive news for tradies - with a $1.6 billion fund for trades and apprenticeships - Ms Cronin-Knight believes the Government should also consider opportunities for SMEs within packages like the $1bn Environmental Jobs package.

“This would encourage business growth and employment opportunities and will help SMEs in these sectors expand as they support our national agenda,” says Ms Cronin-Knight.

Ms Cronin-Knight also believes businesses will pleased to see the Government’s recognition of the need to encourage entrepreneurialism, with $230 million set aside to support ‘risk-taking’. This includes a $150 million fund for loans to cover up to 50% of a businesses’ R&D investment and $80 million in tax deductions available for unsuccessful or abandoned assets created as part of product development.

“Over a fifth of businesses surveyed in our recent Business Monitor wanted to see easier access to R&D tax credits to support their investment in growth and development.”

Mental health impacts

One area that Ms Cronin-Knight would like to have seen in today’s 2020 Budget was mental health support for SME owners and operators.

“While the financial impact of the lockdown has been enormous, the incredible stress and worry that has gone with it has also had a major effect on the health and wellbeing of New Zealand business owners. These feelings are also likely to remain for some time to come as their efforts continue to focus on survival and recovery,” explains Ms Cronin-Knight.

“We know through our research, that nearly 1-in-3 SME owners experience a mental health condition – far higher than the 1-in-5 national average – in the ordinary course of running their business.

“The COVID-19 crisis is likely to have only exacerbated that, so it would be good to see the Government carve out some dedicated funding or support to address the unique pressures and experiences business owners face, over the coming months.”