Coronavirus: Businesses report drop in sales, say Omicron 'fear' is keeping people at home

More than half of small- and medium-sized businesses expect to be hurt financially if Aotearoa remains at the red light setting for longer than a month, with nearly a third reporting sales have dipped since restrictions were increased in January.

A group representing hospitality businesses is also concerned Kiwis are hesitant to dine out due to what it says is "messaging of fear" about the outbreak, scaring people about the Omicron variant and leading them to not head into the stores.

Research commissioned by business management platform MYOB released on Friday shows 58 percent of small and medium enterprises (SMEs) expected to see a negative impact on their financial health if New Zealand stays at the red light setting for more than a month. 

Nearly a quarter (23 percent) believe they would take a "significant financial hit", while a little more than a third (35 percent) don't expect a financial knock if the settings extend beyond February.

The survey was carried out between January 28 and February 4, days after New Zealand moved to the red light setting of the COVID-19 Protection Framework. That shift on January 23 came after a handful of Omicron cases were detected in the community, sparking fears the country may soon be subject to an explosion in infections similar to that witnessed around the world. 

While the red light settings aren't as restrictive as alert levels 3 and 4, which included stay at home orders and halted the operation of non-essential businesses, they do put limits on gathering sizes and impose distancing and seating requirements on hospitality.

Businesses are reporting a drop in sales since the Omicron outbreak began.
Businesses are reporting a drop in sales since the Omicron outbreak began. Photo credit: Getty Images.

Businesses are also concerned that fear of Omicron is keeping people home.

The survey found in the nearly three weeks since restrictions were increased, 32 percent of SMEs had fewer sales, 27 percent say their customer numbers were lower than usual, 22 percent believe there was pressure on cash flow and 18 percent say they had less work due to cancellations. 

"For two years businesses have struggled, yet adapted where they could, in order to keep cash flowing in. Now, we are seeing new restrictions take their toll through limited customers and sales, and this time businesses have fewer options to access Government support," said MYOB Head of Go-to-Market Jo Tozer.

"Consumers are taking both a cautious approach to spending – particularly when facing the prospect of lengthy isolation periods themselves – and how they connect with others due to the community outbreak of the Omicron variant, and while these are understandable precautions given our limited experience with the new variant so far, unfortunately, some businesses are continuing to near breaking point."

Alarm bells are also being rung by the Restaurant Association, which on Thursday reported businesses had had a 30 percent year-on-year decline in revenue. 

It said 55 percent of businesses it surveyed in the last week of January experienced "significant reductions in revenue" as a result of the Omicron outbreak. More than half reported cancellations, 88 percent reported a downturn in customer patronage and 74 percent had noticed customer hesitancy.

"Whilst the red light setting is still a green light for diners, sadly the Government modelling and current messaging is having the adverse effect on patronage," chief executive Marisa Bidois said.

She said businesses want customers to know "dining out is safe".

"The messaging of fear continues to be an issue for our industry and if the Government does not change this, it should be looking at offering financial support to those industries that continue to suffer as a result of it."

Restaurants have seen a fall in patronage.
Restaurants have seen a fall in patronage. Photo credit: Getty Images.

Paul Day from Machete Brothers in Wellington said the day after the move to red, his business had a 75 percent decline in revenue, which he puts down to people choosing to work from home. 

"The full week decline remains at 60 percent decline with no indication people will return to offices until orange level," Day said. 

Rene Beijer of Auckland's Thirty Nine Café said "the fear has taken over and is causing people to stay at home which has killed trade". 

"No support is gutting us. There's a feeling of just 'hold on', well we're holding - reducing hours and not opening on slow days just to try and attempt to break even."

While the wage subsidy isn't available as it was during past lockdowns, the Government does have the Leave Support Scheme. It pays a flat rate of $600 per week per full time work and $359 per week per part time worker if workers have to self-isolate because of COVID-19 and can't work from home. 

The Short-term Absence Payment is also available. It pays employees who can't work from home while they await a COVID-19 test result. It is a one-off payment of $359 per eligible worker.

Finance Minister Grant Robertson told Stuff that advice he has received from Treasury shows the economic impact of the red setting was estimated to be 2 percent to 5 percent of GDP, compared with 4 percent to 6 percent under alert level 2. 

"In terms of support, the Small Business Cashflow Loans scheme is still open for applications until December 2023. The Commissioner of Inland Revenue is also able to offer deferred payments on some tax obligations," he said.

"The Government is continually monitoring the impact of the Covid pandemic on businesses, including up-to-date sales data. As with the recently announced arts and creative sector package we are considering whether targeted support for some sectors is necessary."

Finance Minister Grant Robertson.
Finance Minister Grant Robertson. Photo credit: Getty Images.

Impact of isolating

There are also concerns among SMEs about how requirements for cases and contacts to isolate will impact the ability to operate.

Currently, at phase one of the Omicron plan, cases must isolate for 14 days and contacts must isolate for 10 days. However this will drop to 10 days and seven days respectively when the country moves to the second phase. 

The MYOB survey found 45 percent of SMEs were concerned they may not have enough employees to continue operating at the same capacity, while 35 percent said they will have to temporarily close if most or all employees become infected. The same number said some of their employees can't work from home.

Tozer said it's concerning that 31 percent of SMEs will have "zero or limited cashflow if most or all employees have to isolate because they've contracted the virus or are a close contact". 

Overseas, there have been severe supply chain issues and problems staffing businesses due to the highly transmissible Omicron forcing a large number of people to self-isolate. 

The survey highlighted the supply chain issues businesses are having in New Zealand, with 21 percent saying they don't currently have appropriate levels of stock. It also found 15 percent of SMEs could only operate for one or two weeks without any new stock coming in, 21 percent could last three to four weeks, 17 percent could last one to two months and 13 percent could last for at least six months. 

The Government's attempting to provide some relief to businesses by introducing a scheme in which some workers who return daily negative results using rapid antigen test kits can still go to work if they become a contact of a case. However, this scheme is only available to businesses who are considered "critical services". 

In detailing how the scheme will work, associate Health Minister Dr Ayesha Verrall on Thursday said businesses who choose to participate in the scheme must realise that bringing close contacts into the workplace comes with risk. 

"While the new scheme will help businesses continue to operate, rapid antigen testing is about 80 percent accurate. This may mean they have someone onsite who has COVID-19 and could infect other workers, which could further compromise business operations."

Dr Verrall said workers will be able to use RATS their employers have secured or obtain testing kits from a collection site. Workers will be given enough testing kits to cover the period they would have been isolating and collection sites will be highlighted on the Healthpoint website. 

Dr Ayesha Verrall revealed the new scheme on Thursday.
Dr Ayesha Verrall revealed the new scheme on Thursday. Photo credit: Getty Images.

According to the MYOB survey, just 10 percent of local SMEs have been able to secure RATS. It comes amid claims that the Government has been taking stock from suppliers that was destined for the private sector, something the Prime Minister has pushed back on strongly.

If RATs were to become more widely available in the workplace, the survey found 33 percent of SMEs will request employees take a test weekly before coming into work. A quarter won't require employees to test themselves, while one-in-ten will require a daily test.

The survey also shows 52 percent of SMEs have plans to prevent or mitigate the spread of the virus, while 35 percent are in the process of making one. The businesses are planning to step up their hygiene measures, only allow fully vaccinated workers on the premises, mandate mask-wearing onsite, shift to remote working, cut down on employees coming into work and dividing teams into bubbles.