The latest Xero Small Business Index report, which is based on aggregated and anonymised transactions from hundreds of thousands of small businesses in Australia, reveals that the Index fell by 41 points to 101 points in July, the lowest it has been since December 2020.
The Index, produced in partnership with Accenture and part of the Xero Small Business Insights program, reports that overall business performance in July was around average. However, it was a sharp decline from the upward trend that the Index performance recorded from January up to that point.
The report notes that the primary factor for this decline has been the reimposition of restrictions in different parts of Australia during. Notably, it cited the restrictions in Greater Sydney imposed throughout July, Victoria’s lockdown from 15 to 27 July, and South Australia’s lockdown from 20 to 27 July.
Sales in small business – adjusted using annualised two-year growth – rose just 2.9 per cent year-on-year (y/y) in July, a big drop compared to June’s sales growth of 11.2 per cent y/y. It is also the slowest growth rate since January.
NSW was the only state to see a decline in sales, with a decrease of 0.3 per cent y/y, after recording an increase of 11.1 per cent y/y in June. Victoria, on the other hand, experienced slow sales growth of +4.4 per cent y/y (adjusted) from June’s +10.1 per cent y/y (adjusted). South Australia also had slower sales growth of +1.5 per cent y/y in July, compared to +11.4 per cent y/y in June.
The hardest-hit sectors in July were arts and recreation and hospitality, falling 9.2 per cent and 6.5 per cent y/y, respectively. The information media and telecommunications sector also saw a decline in July (-0.2 per cent y/y). Greater Sydney’s first ban on construction activity in the final two weeks of July is seen to have contributed to weak sales growth in the construction sector of +2.4 per cent (adjusted), down from +12.5 per cent y/y in June.
Jobs in the small business sector rose 2.6 per cent y/y in July 2021, but growth was relatively low compared to June and is the slowest jobs growth since February 2021. New South Wales (+0.4 per cent y/y) and Victoria (+2.7 per cent y/y) had the weakest jobs growth of the states, while Western Australia’s jobs growth rose at 6.7 per cent y/y. Arts & recreation and hospitality experienced the sharpest decline in jobs growth by 3.5 per cent and 3.2 per cent y/y, accordingly, as many businesses were forced to close once again.
“The road to recovery hit a major bump in July,” Joseph Lyons, Managing Director Australia and Asia at Xero, said. “As half of the Australian population endured stay at home orders, we saw a significant impact on the performance of small business as measured by the Xero Small Business Index. The Index fell to its lowest result since December last year, with sales and jobs performance hit particularly hard.
“With lockdown restrictions in August spanning NSW, Victoria, Queensland, Northern Territory and the ACT, and the threat of the Delta variant not abating, small businesses right across the country are facing continued uncertainty,” Lyons added. “Government support packages are vital to the ongoing viability of the sector, particularly across hard-hit industries such as arts and recreation, tourism and hospitality. Within communities, we must do everything we can to ensure people in small businesses feel our support.”
This story originally appeared in our sister publication, Inside Small Business.