Why second coronavirus wave has been ‘much crueller’ to Victorian small businesses

Many small businesses that survived the first coronavirus lockdown have now been dealt a fatal blow during the second. And the worst may be yet to come, experts warn.

Every week a number of small business owners close the doors on their cafe, hairdressing salon, clothing store, garden centre or child care centre.

COVID-19 has taken no prisoners in the small business sector. Many owners already exhausted by just surviving the first lockdown are deciding that the numbers simply aren’t adding up a second time round.

“I think many small businesses felt they were on a positive flight path after the first lockdown,” said Professor Roger Wilkins, of the University of Melbourne business and economics faculty.

“The hospitality, arts and recreation arenas knew the outlook was still tough, but I think there was a broad sense in the business community that things were positive. The second outbreak has been much crueller than the first wave.

“Just as small businesses were finding ways to make their business viable again, the second lockdown and stage four restrictions have meant annihilation for some.”

Australian Small Business and Family Enterprise Ombudsman Kate Carnell has warned of a tsunami of insolvencies to come, triggered by the pandemic.

She has also called for changes to current insolvency practices to help small businesses in financial trouble.

“Sadly, many small businesses have been driven to the brink by factors outside of their control, such as the COVID crisis,” Ms Carnell said.

“The reality is that Australia is now in the grip of a recession. Trading conditions are the worst we’ve seen since the Great Depression and many small businesses won’t survive.

“Instead of getting the support they need to turn it around, small businesses too often find themselves on an express train to winding up with no control over the process.”

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Prof Wilkins believes it will be survival of the fittest when Melbourne emerges from stage four restrictions and a gradual easing of constraints.

“I think we are likely to go in and out of lockdown for some time until we get a vaccine,” he said.

“I think it is likely to be a new normal to a degree, so for at least the next year it won’t be realistic to make plans based on the way things were before March

“Small businesses will need to do some innovative thinking about how to reinvent themselves where they can, and the focus of that will be having an online presence.

“Some business will have limited potential to do that and so will say it’s time to wind it up and maybe start a new venture down the track.

“On the flip side of the coin, if you stay in business you’ll be better placed to benefit from an upswing because there will be fewer competitors around.”