Security and emergency incidents a daily reality for AT, out of blue decision to move Auckland Speedway and bowel cancer breakthrough at Otago uni.
Almost a third of small businesses are downsizing their workforces as sales continue to decline, according to the latest Small Business Insights from Xero.
Xero has revealed 31.3% of small businesses cut staff in the quarter to September, the highest proportion of businesses since early 2020,when lockdowns were instated.
Bridget Snelling, Xero NZ country manager, said continued sales declines for small businesses were beginning to impact other key metrics, particularly the workforce.
Hospitality reported the largest decrease for the quarter, with 45.3% of small hospitality businesses shrinking their workforce.
Hospitality NZ chief executive Steve Armitage. Photo / Michael Craig
Hospitality NZ chief executive Steve Armitage said it was always sad to see workforce reductions, but sometimes they were unavoidable even after businesses adjusted operations.
“Small hospitality businesses across the motu are reducing their workforces, a response to mounting pressures like rising costs, reduced foot traffic, and fluctuating customer sentiment,” Armitage said.
“Hospitality NZ is committed to supporting employers and their teams by offering resources and guidance, including advice on finding employment opportunities for affected staff.”
He remained hopeful that, thanks to recent Official Cash Rate (OCR) cuts and gradual improvements in business confidence, this summer could potentially be the turning point for the industry.
“With warmer months around the corner, traditionally the busiest time of year for hospitality, we are hopeful for a strong period of trade.”
Manufacturing and construction were also particularly impacted, with small businesses in the two industries shrinking their workforces by 34.9% and 33% respectively year on year (YoY)
The region with the largest proportion of small businesses decreasing their workforces was Auckland, with 34.1% of small businesses reporting a contraction.
Meanwhile, Hawke’s Bay is continuing its recovery post-Cyclone Gabrielle, as 30% of small businesses in the region have grown their workforces in the past year.
Another key metric affected by dropping sales was wage growth. It fell in the quarter to September by 0.9% to 2.8% YoY, down from the 3.7% rise last quarter.
According to Xero, it’s now significantly less than the pre-pandemic average of 3.9%.
The relationship between job growth and workforce sizes is also complex, as while job growth was up 6.6% YoY this quarter, it’s only concentrated in about 27% of small businesses.
Sales down another quarter
Small business sales fell 2.7% year-on-year in the quarter to September, a bigger decline than the 1.4% YoY fall recorded in the quarter to June 2024.
Snelling said apart from a couple of months, small business sales had been flat or declining over the past 12 months.
Xero New Zealand country manager Bridget Snelling said the situation for small businesses in New Zealand couldn't be more different compared with those in Australia. Photo / Supplied
Small businesses in all industries reported sales declines over the quarter, except for those classified as “other services”, which grew by 1.3% YoY.
Other services include a range of personal services such as hair, beauty, weight management, funerals and religious services.
Breaking down the largest sales declines by industry YoY, construction fell by 5.1%, agriculture fell by 4.1% and retail fell by 4%.
Regionally, Taranaki reported the biggest drop in small business sales decline, down 6% YoY.
Snelling said the situation for small businesses in Australia could not be more different.
“Their sales are up +3.5%, more small businesses are growing their workforces than decreasing them, and wage growth is close to the pre-pandemic average.
“The growth in Australia is below average, too, which adds context to the challenges the Aotearoa New Zealand small business community is facing.”
Snelling said many small businesses were yet to feel the impact of recent OCR cuts in August and October, as well as the income tax cuts earlier in the year.
She encouraged shoppers to do their part to support small businesses during the challenging economic environment, especially when considering late invoices.
“Recent Xero research showed late payments cost Kiwi small businesses $827 million last year. We must all do our part, especially the large organisations with unacceptably long payment terms.”
Consumer confidence back to reality
ANZ’s latest Roy Morgan survey reflected the challenging economic environment small businesses are facing, with topline consumer confidence falling four points in October, down to 91.2.
“Falling interest rates had spurred a cautious recovery in consumer confidence from July, but October marked a sombre return to reality,” ANZ chief economist Sharon Zollner said.
Current and future confidence indexes both reported declines, with regional data pointing to deteriorating job security as a key factor.
The future conditions index fell 5.3 points in October down to 100.3, while the current conditions index fell two points to 77.6.
A net 14% expect to be better off this time next year, down 11 points.
Zollner said interest-rate relief wouldn’t be immediate for many households and there were plenty of challenges still to consider in the short term.
The perception of the economy in 12 months was also down, falling two points back to -19%, while the outlook for five years ahead fell three points to +6%.
Tom Raynel is a multimedia business journalist for the Herald, covering small business and retail.
