As we look at the Xero Small Business Insights (XSBI) data for May, we are starting to see some encouraging signs for small businesses, particularly in sales growth. However, Xero’s Small Business Index – part of XSBI – shows the bumpy road continues across the UK, Australia and New Zealand.
For the month of May, the Index rose in Australia, fell in New Zealand, and remained steady in the UK.
Australia’s Index hit an all time high since records began in January 2017, of 132 in May, the fifth consecutive month of overall above average performance. But, as the lockdown in Victoria saw restrictions return and the New Zealand/Victoria travel bubble paused for a short period from 27 May, we won’t know the impact of this until we see the June data.
The trans-Tasman bubble between Australia and New Zealand opened in mid-April and it’s encouraging to see the May data reflect an improvement in sales and jobs for the previously struggling hospitality industry in both regions.
In the UK, small businesses had their third month of sales growth, despite another extension on restrictions being eased. It’s assuring to now see restrictions start to lift just in time for summer and people start to reunite with friends and family. The vaccine rollout and lifting of indoor restrictions is a positive step towards recovery for small businesses in hospitality, and I’m hopeful that we’ll continue to see this trend improving as restrictions continue to lift.
Jobs growth underpins performance, with UK showing modest signs of rebuild
Strong jobs growth is underpinning the Index performances in both Australia (5.7% y/y) and New Zealand (4.7% y/y). In the UK jobs fell 2.8% y/y, an improvement on a 3.7% fall in April. Please note, these figures are adjusted to account for low May 2020 results.
While it’s encouraging to see this improvement, jobs performance is varied across industries. For example, in all three countries manufacturing jobs are performing better than the national average. Retail trade is also showing strong jobs growth, which may reflect the sector’s ability to adapt to operational restrictions over 2020. Job creation conditions remain challenging in hospitality as patron limits and lockdowns continue to impact Australia (Victoria) and the UK.
Sales growth gathering momentum
Sales growth is now positive in all three countries, but as with jobs there is considerable variation across industries. Ongoing pent-up demand from 2020 is supporting retail trade sales, and manufacturing is also performing above the national average. Of course there are still some businesses that are struggling, including the arts and recreation sector in Australia and the UK, even though venues are operating at or near capacity in most parts of Australia.
The time it took for small businesses to be paid was slightly faster in Australia and New Zealand and broadly unchanged in the UK. This comes after a few months of volatility and sees the overall movements returning to their long-term downward trends of reducing the time it takes to be paid.
May’s key findings
In New Zealand, small business performance declined in May with the Index falling 14 points to 109. While sales and wages slowed, the Index is still sitting at an overall above-average level. May saw improved sales (+7.5% y/y). Jobs growth also improved (-1%y/y) in the hospitality sector, which has struggled for a number of months. However, it’s important to note that these figures are adjusted for the low May 2020 results using a two-year annualised growth rate.
Australia recorded its second month of positive jobs growth above 5%, rising 5.7% y/y when adjusted for the effects of the pandemic. This indicates that small businesses have adjusted well to the end of the wage subsidy in March 2021. Healthcare and retail drove strong sales growth in May, with hospitality sales up 8% y/y (adjusted) as consumers become more confident about spending and eating out.
In the UK, sales grew 2.5% y/y when adjusted, representing three months of sales growth. The Index was unchanged at 86 points in May, reflecting that overall conditions in small businesses were steady despite the winding back of some business trading restrictions.
Read more about our monthly metrics for May in our XSBI updates: