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XERO Small Business Index shows SME jobs suffer

Data released today by Xero produced as part of its small business index shows September was the worst month of 2021 for SMEs, with the index dropping 14 points below average. The index fell to 86 points in September from, recording a decline for the third consecutive month. 

The decline in the index was driven by continued poor SME jobs growth. Jobs growth fell by 0.9 per cent in September; this is the first time growth has dipped into negative territory this year. 

Sales remain strong

Continuing the trend from August, sales remained strong throughout September, rising by 6.6 per cent. This trend indicates that sales growth continued to hold firm, despite the lockdowns imposed on major states throughout September. 

Victoria recorded sales growth of just 3.9 per cent, following growth of 7.2 per cent in August. Meanwhile, NSW proved resilient because of its earlier ending of lockdown; sales grew in NSW by 5.7 per cent in September compared to 3.2 per cent in August. Sales in the COVID-free states remained strong Western Australia saw 13.4 per cent growth and Queensland 10.4 per cent. 

Joseph Lyons, Managing Director Australia and Asia, Xero said, “In September, we were witnessing a tale of two economies. The areas in lockdown saw jobs growth decline and sales stagnate, while states like Queensland and Western Australia thrived without restrictions.” 

October 22nd marked the first time in more than three months that the whole country was free from lockdown restrictions. Businesses in NSW, the ACT and Victoria are reopening and setting upon their journey to recovery, and they will need our support. Historical Xero Small Business Insights data shows the longer restrictions are in place, the longer it takes for small businesses to bounce back. 

Hospitality and arts/recreation were the only industries to experience negative growth in September. Hospitality sales fell by 9.2 per cent, and arts and recreation sales fell by 8.0 per cent. 

Small business jobs

SME jobs growth fell from 1.3 per cent in August to just 0.9 per cent nationally in September. The decline in SME jobs growth was primarily responsible for the decline in the XERO small business Index. This is the first time in 2021 that jobs have fallen and eliminated most of the gains of late 2020 and early 2021.

August saw only NSW experience falling jobs growth; the decline extended across lockdown states to include the ACT and Victoria in September. This has had a significant impact on nationwide jobs growth. The ACT once again experienced the sharpest slowdown, with jobs falling 6.5 per cent. This follows growth of 6.1 per cent in July to growth of 3.2 per cent in August and reveals the impact of a prolonged lockdown.

Louise Southall, Xero Economist, said, “As we saw in August, the decline in jobs growth is not consistent across industries and states. Small businesses in hospitality and arts and recreation continue to be the most impacted by lockdowns. Following a number of months of solid growth, we even saw jobs in the retail sector down 0.7per cent y/y.” 

Slight improvement in late payments

Xero’s data shows that small businesses had to wait on average 0.1 fewer days to be paid by customers in September. Companies, on average, waited 23.6 days for payment. This represents a slight improvement on August, when the metric reached its highest since September 2020.

The late payments measure, which tracks the average number of days that invoices are paid late, improved to 6.6 days, down from 7.1 days in August, meaning businesses are on average being paid just under a week late.

Impact of eased restrictions

As restrictions have eased across NSW, the ACT, and Victoria in October, the XERO small business Index released in November will show an initial indication of how the economy will respond nationally and in individual states. 

Mr Lyons said, “While we won’t know the full extent of the post-lockdown bounce back for a few months, it’s encouraging to see people in locked-down areas celebrate the easing of restrictions by backing small businesses. 

“Whether dining at a local restaurant, queuing to get a long-awaited haircut or booking tickets for a comedy show, communities are showing their support for industries that bore the brunt of the pandemic.”

 The impacts of the end of many COVID restrictions across the country will be assessed in Xero’s next monthly update to be released in late November.

Read more:Sydney’s post lockdown spending boom

Read more:Xero Small Business Index shows green shoots in sales

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Heidi Heck

Heidi Heck

Heidi Heck is a Journalist at Dynamic Business. She is a student at the University of Queensland where she studies Journalism and Economics. Heidi has a passion for the stories of small business, as well as the bigger picture of economics.

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