A second lockdown extension could “wipe out” businesses

The extended lockdown in Sydney has been a mixed bag for small and medium sized businesses with many retailers still able to operate amid restrictions. But while the lion’s share of Simplicity Loans and Advisory’s clients have not been greatly impacted by the stay-at-home orders, for the ones that have, the effects have been significant, said executive director Matthew Johnson.

“We have customers who are getting literally zero revenue,” he told MPA. “They’ve had to close their doors totally and they are generating no income for a period of time.”

Those in the hospitality industry are among the hardest hit, with many restauranteurs choosing to close completely rather than run a takeaway operation at a loss. He said restaurants in Sydney’s Eastern suburbs and CBD were already trading at reduced revenue in the week leading up to the lockdown, which was meant to go for two weeks but was extended to three on Wednesday.

“I’m hearing anecdotally that there’s probably going to be some hospitality businesses out there that may not bounce back from this,” said Johnson.  “If you’re getting hit for a full four weeks of business that you can’t take - a lot of businesses can’t take that.

“Plenty can, and they’re eating into their reserves, but there’d be plenty out there that will struggle to bounce back.”

Read more: How brokers can help SME clients now

If the lockdown is extended a second time, Johnson believes it could be a devastating blow for many impacted businesses.

“I think that could wipe out a lot of businesses,” he said. “Without additional government support, I think we’ll see a lot of businesses fall over if the lockdown is extended.”

A couple of days into the lockdown, the NSW Government announced support measures for impacted small businesses, including grants of up to $10,000. But, according to Johnson, this simply isn’t enough to replace the lost revenue of many of his clients.

“It’s a nice gesture but for a lot of businesses, unfortunately, it doesn’t have a massive tangible benefit,” he said. “One of our clients, for example, was talking about the fact he has probably lost about $480,000 worth of revenue during this month, so $10,000 in that period of time is a drop in the ocean.”

But while the lockdown has been dire for some businesses, many more are doing OK. Johnson said only 10-15% of Simplicity’s Sydney clients were operating in impacted industries.

Read next: Lockdown could bring surge in buyers

“We’ve got plenty of clients who have rotated back to remote working and are ticking over really well,” he said. “There’s a lot of positivity still out there in SME land and that’s still definitely coming through in our conversations.”

Throughout the lockdown, Johnson and his colleagues have been reaching out to their SME clients to make sure they are OK – something that brokers have excelled in since the pandemic started early last year.

“At the moment, a lot of feedback from clients when we’re asking them is, ‘there’s not a lot you can do but I really appreciate you asking me’,” he said. “But, if we can just be speaking to clients and reaching out, that’s the biggest thing we can do at the moment.”

Kate McIntyre is an online writer for Mortgage Professional Australia. She has a wealth of experience as a storyteller and journalist for a range of leading media outlets, particularly in real estate, property investing and finance. She loves uncovering the heart behind every story and aims to inspire others through the artful simplicity of well-written words.
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