How New Zealand's small business economy is faring a year after Covid began

Steve Vamos, chief executive of Xero. Photo / Supplied

New Zealand's small business economy has fared better than Australia's and Britain's through the recovery over the past year, according to new data.

According to insights from Xero's Small Business Index launched today, small and medium-sized firms continued to recover from the economic impact of the pandemic during March.

The index - which replaces the software company's previous Small Business Insights metrics, rose by 17 points to 122 points, up 16 per cent on February's result. This is up from an all-time low of 18 during the height of disruption last year.

This is the second month the index has been above 100. The rise was driven by improvements in all four sub-metrics; sales, jobs, time to be paid and wages.

Small business sales rose 14.3 per year-on-year in March, while the average time to be paid in the month was 21.2 days - down 4.3 days compared to pre-pandemic times.

Sales were up across all industries in March, with sales in retail up 25.5 per cent, manufacturing 23.5 per cent, real estate 17.6 per cent and hospitality 17 per cent.

Small business wages, measured by average employee hourly earnings, rose 3.2 per cent year-on-year in March and jobs grew 3.7 per cent - the strongest growth rate recorded since March 2020, prior to the pandemic impacting employment.

Xero Small Business Insights has changed its data tracking lines to focus on sales instead of revenue, jobs, time to be paid and wages to reflect the current operating state of the small business sector and the contribution made to the community following as the sector moves through the recovery phase post-pandemic.

Steve Vamos, who took over as chief executive of Xero in 2018, said small firms had shown resilience as they adapted and adjusted to unusual trading realities through last year.

He said New Zealand and Australia's swift lockdown measures in responses to the pandemic had resulted in a stronger and faster recovery relative to Britain's.

The Small Business Index shows the small business sector in New Zealand had undergone a V-shaped recovery, with an initial sharp drop in economic activity followed by a sharp spike.

Britain's Index is not yet back above 100 - currently sitting at 87, and its small businesses are still facing significant challenges, while the Australian Small Business Index sits at 129.

Vamos said local New Zealand data was encouraging and he expected the sector to continue its upwards trend of recovery.

"It's hard to predict [what's ahead] but you have to feel that conditions are improving, certainly opening up the travel industry now between Australia and New Zealand is going to help in the hospitality and tourism sector.

"You have to be quietly confident that things will continue to improve. [However] it is still uncertain with what's happening around the world so [we're] cautiously confident.

"New Zealand businesses have done very well relative to what we've seen elsewhere."

Vamos said he expected the recovery to continue at pace, and there was evidence that the firms that had coped better than others had been using technology.

"People in small business are resilient so not only do we expect our customers will continue to evolve their business but we'll see more and more new businesses being created."

Xero's Small Business Index draws on data from more than 300,000 businesses spread across New Zealand, Australia and Britain.