Businesses brace for subsidy end

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by Chris Tobin

Businesses around South Canterbury are bracing themselves for September 1, when the Government’s wage subsidy extension tap will be turned off.

“The wage subsidy and the wage subsidy extension have been an absolute lifeline for many businesses,” South Canterbury Chamber of Commerce chief executive Wendy Smith said.

Predictions have been made that thousands of New Zealanders around the country could lose their jobs once the subsidy ends.

“Like others, we are concerned about the impact of the wage subsidy finishing and anticipate this will have a direct effect on employment numbers,” Mrs Smith said.

“However, many businesses have traded far better than they had expected to and in the tourism industry a number of businesses have pivoted into the domestic market.

“The Mackenzie district performed well during the school holidays and was up 42.5% in visitor numbers on last year’s winter school holidays, demonstrating how New Zealanders really are exploring their own backyards.

“There were over 13,000 visitors in the region on July 9 as reported by ChristchurchNZ. An incredible result.”

Businesses would certainly be impacted by the end of the subsidy, she said.

“But they have had time to plan for this and refocus their businesses. Overall, South Canterbury is performing strongly and should come through this difficult period far better off than other regions.

“The number of businesses claiming the wage subsidy extension has dramatically reduced, which is very pleasing to see and is testament to better trading conditions,” Mrs Smith said.

A small-scale South Canterbury agricultural sector employer with four staff who did not want to be named said he would survive once the wage subsidy extension ended.

“Things are looking not too bad as long as Covid-19 doesn’t come again. Once spring arrives, it always picks up for us.”

Timaru Salvation Army Captain Andrew Bright expected greater demand for the organisation’s services when the wage subsidy ended.

“We expect there to be a surge in demand for food and increased pressure on housing, which is already difficult for many on low incomes and benefits to secure.

“While we have seen a new cohort of people needing help for the first time as they have lost jobs or had to live on reduced wages, it is still those who are the poorest who are bearing the brunt of the effects of Covid-19.”

After the lockdown was lifted the demand for food parcels reduced, he said.

“In the June-July 2019 period we distributed 81 and 123 food parcels, respectively.

“In June-July 2020 we distributed 93 and 145 – about a 15% increase over last year.

“In January, February and March this year the numbers were 137, 124 and 123 [food parcels]. So compared to pre-lockdown, we are doing a little less than before lockdown.

“However, many of our clients are experiencing a lot of stress due to the uncertainty of the economy going forward.”

A nationwide survey by Retail NZ showed 75% of those who responded felt confident or very confident that their business would survive the next 12 months.

“But 13% are expecting to make employees redundant when the wage subsidy ends and another 13% have seen a significant decrease in foot traffic,” Retail NZ chief executive Greg Harford said.

“Sales across the sector were strong in July, up substantially on the previous year, although, overall, retail sales are down 9.6% since March, and the recovery appears to be slowing.’

Wage subsidy

  • The Government paid $12billion in wage subsidies as of June 26, 2020. A total of 7146 repaid $204.9million.
  • The wage subsidy ran for 12 weeks but was then extended for eight weeks for businesses having a drop of 40% or more in their business income.
  • The subsidy has helped 1.7million workers.
  • Most businesses that received the subsidy during the lockdown did not have it extended.
  • Those who did were generally small operators with 20 or fewer staff.
  • Large payouts have included: The Warehouse (8596 employees) $51.9million, Alliance Group (4913 employees) $33.10million.