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SME confidence suffers under lockdowns: ACA monthly SME COVID tracker report

ACA’s monthly SME COVID tracker report shows that SMEs across the country are feeling the full force of COVID-19 lockdowns. The report showed that in July, more than 50 per cent of businesses recorded a decline in revenue as a direct result of COVID-19. 

SME sentiment has shifted

With half of the Australian population in lockdown, it is easy to see why SMEs are struggling. Many fear for the survival of their businesses, one in four firms have either temporarily or permanently closed. Meanwhile, a third of SMEs have reduced their working hours.

SME sentiment has shifted in the last month, with the prospect of reopening anytime soon becoming more unlikely. As the business community loses confidence, SMEs are focusing on survival and recovery.  

James Organ, the managing director of ACA research, said, “Looking forward, growth expectations for the next three months have deteriorated as confidence in the local economy is significantly weaker, and a third of businesses are now focusing on recovery. A similar negative trend can be seen regarding the global economy.

“In summary, expanded lockdowns and restrictions have accelerated the negative impact on key financial indicators and sentiment. This trend is likely to continue until vaccination targets are met, and restrictions eased. With one-quarter of SMEs now-shuttered (some permanently), it is looking increasingly likely that employment and capital expenditure will decline sharply during the next three months.”

Impact on revenue

While Australia’s two most populous states remain in lockdown, small business sentiment is  in continuing decline. With little hope that lockdowns will end anytime soon, 28 per cent of SME decision-makers predict that revenue will decline further in the coming month. 

All states included in the survey recorded a fall in mean revenue throughout August. SMEs in New South Wales have been hit the hardest, with an average decline in revenue of 23 per cent. Profits margins also fell across the country, with 34 per cent of SMEs reporting lower profits. 

Falling profits are part of a worrying trend that has not seen average losses amongst SMEs drop for four months (excluding a slight decrease in June). Profit and revenue figures include government stimulus and support measures. 

The impact of COVID-19 restrictions on SME confidence and sentiment is clear. SME decision-makers are worried about the long term survival of their ventures, even with available government assistance. 

“SME confidence is fragile with more than 50% concerned about survival. Overall, SMEs understand there will be a recovery, but many will not survive that long,” said Mr Organ. 

Lockdowns 

Lockdowns are impacting business revenue and profits. Not only are states in lockdown affected, but the effects of reduced trade are also being reported across the country. 

Job vacancies fell sharply in August from 32 per cent to 25 per cent. This fall is in line with the effects of lockdowns, and uncertainties that affect SMEs’ willingness and need to hire new staff. As of August, SMEs reported that just under half of their current team were working from home due to lockdowns.

Overall, SME confidence in revenues and economic conditions have fallen on account of ongoing lockdowns. Twenty-eight per cent of SMEs expect lower revenue in the next three months, while 43 per cent believe economic conditions will worsen. 

Mr Organ said, “Longer-term business confidence will remain weak until lockdowns are lifted.”

Government support 

ACA’s report found that approval of government support and handing is at an all-time low. Forty-five per cent of SME decision-makers now feel the Federal Government response has been inadequate. Representing a 10 per cent rise on July’s figures. 

The New South Wales State Government has also experienced a sharp drop in approval since last month; 50 per cent of SMEs are unsatisfied with the work of the New South Wales Government. 

The report found that only 40 per cent of SMEs were able and willing to access government support, leaving many businesses without help. 

  • 64 per cent of SMEs felt they didn’t qualify for the JobSaver Payment
  • 71 per cent of SMEs thought they didn’t qualify for COVID-19 Small-Medium Business Grant.

Mr Organ said,” Indefinite lockdowns will result in business closures rising swiftly unless the Government steps in with significantly more support.

“The general feeling is that SMEs are bearing the brunt of the vaccination mismanagement. If the Government had acted quickly, the vaccination rate would have prevented extended lockdowns. In addition, satisfaction with the support packages now are very low compared to that seen with JobSeeker and JobKeeper, and hence SMEs are feeling more vulnerable.”

Other key findings 

  • Demand for insolvency regulation has dropped back to previous levels, likely as a result of many SMEs accessing Government support.
  • The difficulty level when hiring has declined in line with the number of employers currently trying to fill vacant roles. Competition from other businesses remains high, as does a lack of skilled candidates.
  • Despite the spread of the virus, businesses are still keen to relax restrictions on labour migration.
  • Productivity levels are being hampered, as more people are required to work from home, many of which are in job roles that have not experienced these conditions before. 
  • Business closures are most prominent in NSW, whilst in VIC, the focus has been on decreasing operational costs.

Read more: Funding for innovative ventures tackling COVID-19

Read more: Government assistance for COVID-19 impacted small businesses: Do you qualify?

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