Grim business conditions mean business support needs to be re-evaluated regularly, Business SA says

The business support response to the Covid-19 crisis has been timely and welcome, but needs to be re-evaluated regularly to ensure it stays relevant and useful, Business SA says.

It is clear that the chaos caused by COVID-19 has presented a monumental challenge for the local business community, the likes of which have not been seen since the Second World War.

The sentiment from the March quarter Business SA-William Buck Survey of Business Expectations is best described as grim.

Both confidence, which has fallen 44.1 points to an all-time low of 41 points and conditions, down 30.5 points to another all-time low of 66.8 points, have been sent free falling well into negative territory.

Unfortunately, we expect conditions to worsen before they get better, with businesses expecting further falls over the June quarter, which will then capture the full disruption to businesses caused by COVID-19 restrictions.

The Business SA-William Buck Survey of Business Expectations in particular highlighted the impacts on those sectors that have really felt the brunt of the pandemic.

While businesses across the board felt anxiety around the immediate months ahead, with 36 per cent casting doubt over whether they could survive another three months of restrictions, in the accommodation, food and retail sector this was even higher with 52 per cent saying it was unlikely they would survive another three months of compromised trading.

There is no doubt that this dramatic fall in confidence and conditions is catastrophic for the SA economy. However, amid the horror story there is a strong sense of businesses getting good support from both the State and Federal Government as well as the banks.

Countless businesses told us that without this support, their situation would have been a lot worse.

The $130 billion JobKeeper package from the Federal Government was hailed as a game changer with 50 per cent of businesses reporting that they had benefited from the support scheme. Payroll Tax and the State Government’s $10,000 emergency cash grants have also been very welcome, and for the most part, businesses reported good outcomes with their banks.

For businesses that had requested additional financial support and received a response, 89 per cent reported they were successful. However, long delays on processing claims were raised as a concern, which is something the banks should look at improving given the urgency around cash flow requirements. We are a long way from being out of the woods, but we should take some comfort that the response measures to date have been effective. However, we would argue they need to be continually looked at to ensure they remain helpful to evolving business needs.

 There were several stories of landlords acting in good faith passing on rent reductions and deferrals to COVID-19-impacted tenants, but a sizeable minority of businesses made complaints about unreasonable conduct from landlords. This was also reflected in data which showed that of the impacted businesses which had approached their landlord for a rent reduction, 56 per cent received a reduction proportionate to turnover, 20 per cent a reduction less than proportionate to turnover, and 24 per cent no reduction at all. Small businesses with a turnover less than $500,000 were found to be twice less likely to be successful in rent reduction negotiations than businesses in the $2 million-$5 million turnover bracket. This shows the need to ensure the National Cabinet Mandatory Code of Conduct for SME Commercial Leases is also mandated here in SA.

There is no question the economic recovery is the next major challenge for South Australia, and we must ensure we do everything possible to set up our businesses for success, across all sectors. The survival of many might just depend on it.

Martin Haese is chief executive of Business SA.