MP Deborah Russell says businesses struggling in lockdown must have had a lack of financial strength

Dr Deborah Russell, the MP for New Lynn, during a select committee hearing on Tuesday.

A Labour MP says businesses in trouble "after only a few weeks in a pretty bad situation" was a sign they did not have the necessary strength.

Thousands of small businesses outside the food and beverage sector are currently unable to operate, with business leaders warning thousands of businesses could collapse as a result of the lockdown.

During a select committee hearing on Tuesday, Dr Deborah Russell, a former academic, questioned Finance Minister Grant Robertson about her "concerns around small and medium business" and what was being done to build up business strength.

"We are seeing a number of small businesses really struggling, after only a few weeks in a pretty bad situation, which must speak to the strength of those small businesses going into this lockdown.

"It worries that perhaps people went into small business without really understanding how you might build up a business or capitalise a business in the first place, so you have the ongoing strength to survive a setback," Russell said.

"I link that in some way to the fact that we've had quite a low-wage economy so often it looks like you might be better off in business, rather than a low wage."

In response, Robertson repeatedly said he disagreed with Russell's statement.

"I don't necessarily agree with the premise of the question, in fact I don't," Robertson said, adding that even large businesses knew that at any time they could be a few months from trouble. "That's not a judgment on those businesses, it's just the way we do business."

On Wednesday morning Russell again raised concerns that New Zealand's wage levels were causing people to go into business without the necessary skills.

"Because we have a low-wage economy, for a lot of people, they say 'I might as well start my own business' and yet they don't have a lot of understanding of what it takes to run a business, if they go into business," Russell told the Herald.

The comments saw Russell's name trending on Twitter in New Zealand, after Act leader David Seymour posted video of the committee hearing.

"The problem is a lack of empathy and understanding," Seymour said of Russell's comments.

"All businesses are going from payment to payment generally. Working capital is hard to find and generally people don't anticipate that the Government's going to order the economy shut for five weeks.

"This is an unprecedented and totally unanticipated situation. The idea that businesses that haven't prepared for this [that] it's somehow their fault, shows a total lack of understanding for the sector."

Russell, who ran a consultancy business earlier in her career, initially defended the comments, but said the concerns she had raised were not the only concerns she had for business, and denied they showed a lack of empathy.

She later issued a statement insisting she was "really concerned" about small business.

"People work hard to get them up and running, and they are an incredibly important part of our communities. My questions to ministers in the select committee yesterday were about understanding what is being done to help small businesses survive, and what we can do to help them to become more resilient in the difficult times ahead."