Small business confidence at record lows as costs soar and increased compliance burden looms
Small business confidence levels have reached new depths as costs surge, customers refuse to spend and governments impose a “plethora” of new regulation, like country of origin labelling for anchovies on pizza.
NSW
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Small business confidence has plunged to an all-time low as owners who are enduring the worst conditions in a generation shudder at the prospect of being hit with more red tape.
A collapse in consumer confidence has combined with surging costs for energy, insurance and rent to push up failure rates by 36 per cent in a year and leave tens of thousands more SMEs struggling to survive.
Not only is the crisis destroying livelihoods, it is undermining competition, meaning Australians will be left paying extra for goods and services, advocates say.
They argue that with nearly half of all small to medium enterprises in the red, it’s akin to a kick in the gut to then impose a “plethora” of new compliance obligations on superannuation, industrial relations and even the description of anchovies on a pizza.
“Now is probably the worst time to be looking at some of these things,” NSW Small Business Commissioner Chris Lamont told The Daily Telegraph.
SMEs had suffered “rolling shock after rolling shock” over the past three to four years, from fires to Covid, the war in Ukraine, rapid interest rate rises and most recently the conflict in Gaza, Mr Lamont said.
“In my career of 26 or 27 years, I can’t remember a period of more upheaval,” he added.
A new survey for the Small Business Commissioner shows confidence levels are the lowest on record – worse than at the start of the pandemic lockdowns.
An “emerging issue” was the burden of additional compliance obligations, Mr Lamont said.
As an example, he cited the introduction of country of origin labelling on seafood in hospitality from next year.
Pizza shop menus will have to be changed to say whether the anchovies were local or imported.
Most customers don’t care, Mr Lamont said.
“Things like that are just nuts,” he said.
As was the imposition of more red tape on the construction sector by the NSW government, given the industry’s insolvency numbers had doubled in a year.
Mr Lamont said a small business impact statement should be a part of any proposed laws or regulations.
Council of Small Business Organisations of Australia (COSBOA) chief Luke Achterstraat said that unlike big companies, SMEs didn’t have in-house environmental, social, and governance experts or a privacy lawyer.
There are “a million small businesses who are not even able to pay themselves properly or break even,” Mr Achterstraat said.
He was referring to a recent report for the national Small Business Ombudsman that found 43 per cent of SMEs were making no profit, the worst rate since 2012.
Institute of Public Accountants technical policy general manager Tony Greco said that was an alarming statistic.
“If you said 43 per cent of corporate Australia were not making money that would make front-page headlines,” he said.
Mr Achterstraat went further: “There would be a riot on the streets.”
The report for the ombudsman also found three-quarters of small business owners earned less than the average Australian wage, despite working longer hours.
Sydney small business operator Megan Stevenson works six days a week; during Covid she did seven – for two and a half years.
Ms Stevenson is in the process of revamping her food business, Stevie’s Little Shop at Carlton, to reduce the amount of shelf space and increase seating ahead of opening at nights – something she vowed she would never do.
It was getting harder and harder for small businesses, she said, with costs rising and customers struggling.
“It just seems like it’s only large conglomerates that are getting bigger and bigger,” Ms Stevenson said. “It’s unfair.”
Mr Achterstraat questioned whether policymakers were prepared to accept a perpetual decline in the number of small businesses.
If they were, it would be a mistake.
“The best way to create competition and reduce inflation is to back the engine room of the Australian economy which is small business,” Mr Achterstraat argued.
The federal budget was a “missed opportunity” to help.
The $325 energy rebate “won’t even touch the sides,” he said, especially for power-hungry businesses such as bakeries and restaurants.
Mr Greco said there was little talk of productivity improvement in the budget.
Mr Greco said in the previous budget, there had been a productivity-lifting announcement – an additional 20 per cent deduction on spending that supported electrification and more efficient power use.
“It’s not even law yet,” he said.
Nor was the $20,000 instant asset write-off announced last year for 2023-24.
“It’s a ridiculous situation,” Mr Greco said.
With six weeks left before June 30, businesses still had no certainty.
How can small business survive?
By Nicholas Finch
Burger restaurant owner George Mavridis wonders how small businesses like his can survive as he struggle to keep his shopalive.
Mr Mavridis, 40, runs Cheatday Peakhurst with his brother Angelo, but had to reduce staff to save costs when interest ratesstarted rising last year.
While colder months are usually best for their business, they began serving fewer customers from autumn last year and thingshave grown “even worse”.
“Before, people would more than happily buy combos,” Mr Mavridis said. “[Now] they won’t spend the extra $7 to get a combo.”
Meanwhile, the business’ costs has increased. Mr Mavridis said their electricity bills doubled over the past year, from $900-$1000every month to around $2000 every six weeks.
Mr Mavridis said he’d seen many stores close down in the past six months, including one takeaway shop in his street.
“How’s a small business supposed to survive?” he asked.
“If the consumer doesn’t support their favourite small business, that favourite small business could not exist in two months.”
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Originally published as Small business confidence at record lows as costs soar and increased compliance burden looms
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