It’s been two years since the pandemic started to impact our lives and the small business economy is gradually rebuilding and continuing to show adaptability in the face of ongoing challenges. Xero’s Small Business Insights (XSBI) data for February 2022 shows small business sales have continued to perform well despite the disruptions and workforce challenges caused by COVID-19 cases. However, many small businesses in the UK are still suffering from slow jobs growth and late payments.
In February, the Xero Small Business Index – a key indicator of the sector’s health – was above average in New Zealand (115) and Australia (102) and below average in the UK, which sits at 86 – the lowest rating in a year.
Sales growth underpins recovery
Sales growth is underpinning small business recovery, growing 15.2% year-on-year (y/y) in Australia, 13.3% y/y in New Zealand and 8.8% y/y in the UK (when adjusted for base effects). These results reflect the adaptability of small businesses and suggest an increase in people shopping at local small businesses.
Sales growth was particularly strong for small businesses that could easily work from home such as administrative services (+24.6% y/y in Australia and +12.6% y/y when adjusted for base effects in the UK).
Looking ahead, sales growth should continue in the coming months as a result of high household savings. Households in Australia, New Zealand and the UK collectively have a bigger pool of savings than they did pre-pandemic, creating an opportunity for people to be able to spend more on products and services from the small businesses in their communities.
Labour challenges continue to impact UK small businesses
Jobs growth is the main area of weakness in Australia (-1.1% y/y in February), and the UK (-4.3% y/y in February when adjusted). In the UK there are 8.4% fewer people working in small businesses than there were in February 2020. Labour challenges are holding UK small businesses back from recovery as employers struggle to fill job vacancies to support consistent sales growth.
British small businesses have been through a myriad of challenges these past two years so it’s understandable their recovery will be slow. The positive sales growth indicates the economic potential that can be realised if challenges like labour shortages and late payments improve.
Positive signs of adaptability
These results from February suggest that the actions small businesses have taken over the past two years have enabled them to continue to operate and better handle recent disruptions from Omicron. Adaptable small businesses have taken actions like investing in technology to enable ecommerce, and connecting with customers online, as well as implementing new ways of working to maximise efficiency and prepare for workforce disruptions.
Many small businesses will have their advisors to thank. From applying for government support, to business planning and financial forecasting, to recommending and implementing new tools that improve the business, advisors have played a key role in helping small businesses adapt to changing business conditions.
Connection to community stronger than ever
While we continue to see challenging circumstances around the world, it’s uplifting to see such a strong sense of community as people spend with local businesses as reflected in the high sales growth in February. It goes to show the power of collective support and the positive impact we can have on our communities together.
Read more about the XSBI metrics for February in these updates:
Or visit the XSBI homepage.