Following the trend from November, SME decision-makers reported stronger sentiment data in December. Revenue, profit and employment indicators are all strengthening.
Despite December’s positive outcome businesses remain cautious.
Leading business market research firm ACA Research conducts the COVID-19 SME Tracker. It tracks the impact of COVID-19 across more than 400 small and medium enterprises each month.
Revenue and profit grow
Despite 50 per cent of small businesses reporting lower revenues than before the Pandemic, things were looking up in December.
Last month, 18 per cent of SMEs saw revenue growth. Representing the largest single-month jump since the research commenced in April 2020.
This shows that through December, conditions improved because lockdowns ended. In Vic and NSW, SMEs rebounded strongly since restrictions eased.
SME profit data is lacking from the December report. But, critically, 53 per cent of SMEs reported being profitable in November. This is up from only 35 per cent in August when lockdowns were in place.
The report showed that concerns about business survival declined slightly in December. Seventeen per cent of SMEs reported being “not concerned”. Yet, confidence will likely recede as doing business becomes more challenging.
In December, one-quarter of SMEs were recruiting compared to 20 per cent in the same period last year.
Eighty-five per cent of respondents found recruitment difficult. High demand for staff and ongoing spread of the COVID-19, caused the difficulty.
SMEs identified the following as the most significant challenges:
- A lack of candidates applying for positions
- A lack of skilled or qualified candidates.
Current employees’ inability to work after contracting COVID-19 exasperates the situation.
Because employees are hard to attract and keep, 27 per cent of SMEs expect wages to increase over the next three months. When compared to 10 per cent back in August 2020.
Long term outlook
As case numbers grow, resourcing and supply chain issues will worsen current issues. Undermined confidence will continue until there is more certainty about living with COVID-19.
Over the next three months, SME decision-makers expect difficult conditions, locally and globally.
Despite the challenges SMEs face, small businesses are expecting a more positive 2022. With 50 per cent targeting business growth.
To support these growth initiatives, investment intentions are also trending up. There has been increases across all key categories, including:
- Capital investment (23 per cent)
- Employee numbers (21 per cent)
- Marketing spend (23 per cent).
After a jump in November, satisfaction with the Federal government is falling again. Just 36 per cent of SMEs are satisfied with government management of the Pandemic. This data is up 6 per cent when compared to November.
The road ahead
The road ahead looks rocky for SMEs. Despite the good news in December, January’s report might look different. Showing that businesses are hurting because of the “shadow lockdown”.
Demand has dropped as Omicron surged. The upward trend in revenues in December, will likely reverse. This is in line with the significant increase in case numbers over the past four weeks.
ACA Research, Managing Director James Organ said, “In summary, many SMEs finished 2021 on a more positive note with most key indicators trending up. However, business confidence is extremely tenuous with a high level of uncertainty regarding 2022 due to the accelerating spread of COVID and the associated impact on demand, staff and the supply chain.”