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Small businesses bounce back from COVID-19 but job losses continue

·2-min read
New York City, NY/ USA- 5-26-20: New York City Restaurants Reopening Customer Ordering Takeout Food
The UK’s small businesses have begun to bounce back from the impact of COVID-19. Photo: Getty

The UK’s small businesses have begun to bounce back from the impact of COVID-19, with sales up 11% in June — but employment remains subdued, data shows.

Small business revenue showed a slight recovery in June, climbing 11%, marking a significant year-on-year improvement on May, when revenue was down 29%, analysis by small business platform Xero found.

However, revenues in June were still 18% lower than the same time a year ago.

Chart: Xero

Construction, which was down 12% in the year to June, from 41% in the year to May, saw the biggest revenue improvement.

It was followed by manufacturing, which was down 3% year-on-year in June, from 24% in May.

Meanwhile, hospitality (down 51%, from 63%) and arts and recreation (down 37%, from 48%) saw the lowest.

READ MORE: Greggs bakery sales at 72% of pre-virus levels

Payment times also saw “tentative signs of improvement”, with the length of time it took for small businesses to receive payments on invoices decreasing by 1.1 days from May. However, they remained 5.7 days higher than pre-COVID levels.

Despite these signs of recovery, job losses have continued with employment down by 4% — an overall decline of 8% since the UK went into lockdown on 23 March.

The East Midlands saw the biggest monthly drop in employment, at 7%, followed by the North West, which was down 6%.

Chart: Xero

Jobs were down in all industries except media and telecommunications, which saw a monthly increase of 0.5%, according to the data.

The data also showed the UK’s recovery is behind that of New Zealand and Australia, where restrictions were eased sooner — however, these countries have experienced significantly fewer cases of COVID-19.

New Zealand has had the strongest recovery so far, with revenue bouncing back to close to pre-crisis levels already, despite experiencing the largest drop when lockdowns were introduced.

Chart: Xero

“This data suggests initial signs that the UK’s small business economy is starting to recover from the crisis. However, small businesses are yet to show signs of re-hiring in June, with many still subject to restricted trading conditions. We’re hoping the continued relaxation of restrictions in July will be reflected in improved hiring and revenue figures as small business confidence rebuilds,” said Gary Turner, UK managing director of Xero.

“Despite some cautious signs of recovery, small businesses will need more guidance than ever as government support like the furlough scheme and bounce-back loans start to wind down.

“We’ll be working with our small business customers to help them navigate this next phase — ensuring they get the support they need both from their accountants and the government.”