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1 in 10 small businesses to close post-stimulus

Maja Garaca Djurdjevic
Maja Garaca Djurdjevic
30 July 2020 2 minute readShare
1 in 10 small businesses to close post-stimulus

One in 10 Aussie small businesses is expected to close their doors permanently once government support measures are withdrawn at the end of September, new data has revealed.

With two in five Aussie businesses currently relying on support measures — such as wage subsidies, deferring loan repayments or renegotiating rental or lease arrangements — to manage the impacts of the COVID-19 pandemic, one in 10 has admitted they will have no choice but to shut their doors once these measures end.

Data released by the Australian Bureau of Statistics has revealed that as many as 53 per cent of medium businesses are accessing support measures, compared with 42 per cent of small businesses and 38 per cent of large businesses.

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Sue-Ellen Luke, director of technology, innovation and business characteristics statistics, said: “Businesses were asked how they expect to respond when these measures are no longer available.

“The most likely actions reported were to defer or cancel investment plans (16 per cent), change quantity of orders (14 per cent) or reduce the size of their workforce (13 per cent).

 

“One in 10 businesses (10 per cent) reported that if support measures were no longer available, they would expect to close the business.”

Of the businesses admitting they will have to close their doors post-stimulus, 10 per cent are those employing 19 or fewer persons, while 6 per cent belong to the medium bracket and only 2 per cent have 200 or more employees.  

Who is suffering most?

Almost half of all businesses surveyed (47 per cent) told the ABS that revenue had decreased in the previous month. But despite the widespread loss in earnings, four in five businesses reported no change in the number of employees over the previous month.  

In speaking to businesses, the ABS found that while a majority saw minor differences between the reporting period and the previous month, significant differences were witnessed when comparing revenue to the same time last year.

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Multiple businesses also admitted that their operating expenses had increased due to requirements around cleaning and hygiene, namely obtaining cleaning products and personal protective equipment (PPE).

Looking ahead, the ABS revealed that 27 per cent of businesses expect their revenue to decrease further over the next month, while 49 per cent expect it to stay the same.

“Many businesses commented that their expected revenue and operating expenses were heavily dependent on whether government regulations would be changing again or staying the same, specifically those regarding social distancing and travel,” the ABS said.

Where’s the money going?

The ABS revealed that more than half of all surveyed businesses (54 per cent) have received support from the Boosting Cash Flow for Employers measure.

By employment size, the proportion of medium businesses accessing the support stood at 63 per cent, followed by small businesses at 54 per cent and large businesses at 21 per cent.

Asked where the funds have been spent to date, a majority, or 61 per cent, used them to pay wages and salaries, while 56 per cent paid their fixed costs and 33 per cent serviced loans or debt.

As many as 29 per cent of all businesses, however, placed the extra funds in their savings or cash reserves.

The ABS survey was conducted between 15 July and 23 July, on a sample size of 2,000 businesses.

1 in 10 small businesses to close post-stimulus
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Maja Garaca Djurdjevic
Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of My Business. 

Maja has a decade-long career in journalism across finance, business and politics. Now a well-versed reporter in the SME and accounting arena, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies and enabling citizens to influence decision-making.

You can email Maja on [email protected] 

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