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Local SMEs already feeling the pinch from life at Red

It’s been just two and a half weeks since New Zealand entered ‘Red’ and new insights show local SMEs are already doing it tough under the current COVID-19 framework setting, with less sales and fewer customers through the doors, on top of fears around not having enough employees to operate the business.

A new survey by business management platform, MYOB, has revealed that more than half (58%) of New Zealand’s SMEs expect to see a negative impact on the financial health of their business if New Zealand stayed in the current Red light setting for more than a month, with almost a quarter (23%) believing they would take a significant financial hit. Just over a third (35%) of local SMEs said they don’t expect to see a financial impact if the Red light setting extends beyond the end of February.

However, insights from the research also highlighted that life at Red has already impacted business performance in some way for most local SMEs. Nearly a third (32%) of SMEs have had less sales since the country moved into Red, while 27% said their customer numbers are lower than usual, and 22% said there is more pressure on cashflow. Almost a fifth (18%) of SMEs said they have less work on due to cancellations – a likely response to both restrictions on gathering numbers and public nervousness at the start of the community outbreak.

MYOB Head of Go-to-Market, Jo Tozer, says that while we’ve seen some positive developments recently, like the roll out of vaccine boosters and the loosening of MIQ requirements, it’s still not getting any easier for many small business operators.

“For two years businesses have struggled, yet adapted where they could, in order to keep cash flowing in. Now, we are seeing new restrictions take their toll through limited customers and sales, and this time businesses have fewer options to access Government support,” says Jo Tozer.

“Consumers are taking both a cautious approach to spending – particularly when facing the prospect of lengthy isolation periods themselves – and how they connect with others due to the community outbreak of the Omicron variant, and while these are understandable precautions given our limited experience with the new variant so far, unfortunately, some businesses are continuing to near breaking point.”

Reduced workforce may limit business’ capacity

The spread of Omicron in Australia has seen many businesses without employees, leading to reduced business operations, supply issues due to impact on freight and transportation, or temporary business closures. Now, concerns are mounting amongst SMEs in New Zealand about the impact on staffing as the outbreak grows here.

MYOB’s new poll found that nearly half (45%) of SMEs are concerned that they may not have enough employees to continue to operate their business at the same capacity. Almost two-in-five (35%) SMEs said they will have to temporarily close their business if most/all employees become infected, while the same number also said some of their employees cannot do their jobs from home.

“What’s also concerning, is that our survey showed nearly a third (31%) of SMEs said they will have zero or limited cashflow if most or all employees have to isolate because they’ve contracted the virus or are a close contact,” says Jo. “But, having a plan in place to help mitigate the spread of COVID-19 among employees could be a saviour for some SMEs and encouragingly, we’ve seen most are preparing and thinking ahead about this.”

More than half (52%) of local SMEs currently have a plan in place to prevent or mitigate the spread of the virus in their business, while 35% are in the process of making one. For this group of SMEs, the most common actions or strategies shaping their plans included: stepping up hygiene practices (51%), permitting only fully vaccinated workers on the premises (42%), mandatory mask wearing onsite (41%), remote working (30%), cutting down the number of employees working onsite, with the remainder working from home (24%), and dividing the workforce into teams (22%).

RATs yet to be secured for majority of SMEs

With limited availability to date, just 10% of local SMEs said they have secured an order of Rapid Antigen Tests (RATs) for their business, to help monitor the health of their employees.

However, when RATs are more widely available for the workforce, 33% of SMEs MYOB polled said they will request that employees take a test weekly before coming into work, while a quarter (25%) of SMEs will not require employees to take a test. Just one-in-10 SMEs plan on requiring their employees to take a RAT daily.

Getting employees to take Rapid Antigen Tests regularly – especially if they are customer-facing – could not only help them detect the virus early, but also reduce some of the impacts businesses are most concerned about that could result from the spread of COVID-19 between employees,” Jo Tozer explains.

“Being strategic about employees’ hours and placement – such as operating shift-work-type groups and ensuring only a limited number of these groups are on the premises at any one time – could also mean that the business still has capacity to operate, should one of the teams become infected with the virus. With the combination of shift groups and RATs, businesses may have more of a chance to stay on top of the potential negative impact of infections.”

Stock levels starting to wane

As supply chain disruptions continue to bite, more than a fifth (21%) of New Zealand’s SMEs report that they don’t currently have appropriate levels of stock for their business. 

Over the upcoming months, when business operations could be affected due to the spread of Omicron, most SMEs (21%) said they could only operate for up to for three to four weeks without a new shipment coming in, if their supply chain were impacted and stock was on hold. Almost one-in-five (17%) said they could operate for one to two months, 15% said one to two weeks, and just over one-in-10 (13%) could operate for at least six months.

“Dealing with supply chain issues can compound the stress SMEs are currently facing – especially when there’s little they can do to control the circumstances. However, being transparent with customers by communicating clearly and promptly if an issue crops up, and working to find a solution to their needs – such as creating a list of substitutes for popular items or establishing a priority back-order system – could be a good way to help mitigte potential demand issues. 

"SMEs could also consider how to leverage their key communication channels to keep customers up to date on supply levels - whether it’s via their website, social feeds or even a note in their store window,” says Jo.