Small business is meeting COVID-19 challenge
COVID-19 impact survey

Small and medium-sized enterprises (SME) survey: Researchers, acaresearch, fifth quadrant and TEG Insights, have found that the proportion of SMEs with significant revenue declines from COVID-19 (that is, over 30 per cent) has reduced from 57 per cent in July to 45 per cent in late August. This is the lowest level since the inception of the research four months ago.

The survey of small and medium businesses provide timely readings on the economy.

What does it all mean?

• Recent economic news has been encouraging. Home loans rose by a record 8.9 per cent in July. Annual retail sales growth – at 12 per cent – is the strongest in 31 years. Consumer confidence rose by a record 18 per cent in September. And payrolls rose by 0.3 per cent between August 8 and August 22.

• And the latest survey results on small and medium-sized enterprises (SME) also provide grounds for optimism. Fewer businesses are experiencing significant declines in revenues. Further, the proportion of SMEs that are very concerned about business survival has fallen sharply.

• Clearly this is still a very fluid situation. New virus clusters continue to pop up. But as the researchers note, “SMEs are demonstrating a high level of resilience despite the ongoing challenges of the pandemic.”

What do the reports and figures show?

• The latest survey (16th wave) of SMEs by acaresearch and TEG Insights has found:

• “Despite the ongoing issues associated with suppressing the pandemic, it is positive to report the proportion of SMEs with more than 30 per cent revenue declines has reduced from 57 per cent in July to 45 per cent now. This is the lowest level since the inception of the research. Short term revenue expectations are also on the rise with 23 per cent of SMEs predicting higher revenues over the next 4 weeks. Only 21 per cent are expecting revenues to fall which is a drop of 7 per cent, from 28 per cent in the last wave.”

• “…the number of businesses using the JobKeeper program in October is predicted to decline. 19 per cent of those currently using the program now claim they will no longer be eligible in October. This is an increase of 5 per cent, up from 14 per cent last month.”

• “In line with more positive revenue expectations, the proportion of SMEs very concerned about business survival has fallen to 26 per cent compared to 36 per cent in mid-July. Consequently, the proportion of SME decision makers very concerned about their own health and wellbeing has declined to 16 per cent from 21 per cent in the previous wave.”

• On a more negative note:

“More than two thirds of SMEs needing finance during the pandemic have been unsuccessful or not obtained the required amount.

35 per cent of SMEs report lower levels of productivity from employees working from home, especially amongst businesses with 5-19 employees.

54 per cent (up from 47 per cent last wave) of SMEs expect salary increases to be impacted for at least 12 months.”

• The latest survey shows that 50 per cent of Victorian, Western Australian and Queensland businesses have experienced a 30 per cent or more decline in revenue, followed by NSW (45 per cent) and South Australia (28 per cent).

• A net 27 per cent of Western Australian businesses expect improved revenue in four weeks’ time followed by South Australia (9 per cent), NSW (2 per cent) and Queensland 1 per cent). In Victoria a net 35 per cent of businesses are expecting weaker revenues.

• The research also found “an increasing number of businesses will continue to support all eligible staff when the JobKeeper payments reduce in October.”

What is the importance of the economic data?

• acaresearch, fifth quadrant and TEG Insights have been compiling surveys of small and medium-sized businesses since April 5 to gauge the impact of COVID-19 on the economy. The results provide timely valuable guidance of broader trends.

What are the implications for investors?

• In the fast-moving and volatile COVID-19 business environment, it is important to gauge the latest trends. Fortunately the Australian Bureau of Statistics (ABS) and private-sector researchers and economists are regularly providing fresh data and survey results. Clearly this is important to allow governments, investors and businesses to plan and respond.

• Australia seems to be moving in the right direction. But as we’ve seen both locally and abroad, there is no room for complacency. What is clear is that COVID-19 has created a multi-speed economy. It will be important for government to take this into account to ensure support and stimulus is appropriately directed.

Published by Craig James, Chief Economist, CommSec