Xero says the country's small businesses are reporting continuing sales declines and slowing wages growth

Nearly a third of the country's small businesses are reducing their workforces, according to small business platform Xero.

This comes amid continuing sales declines and slowing wages growth, the company says in its Xero Small Business Insights data release for the September quarter,

Xero's NZ country manager Bridget Snelling, said that apart from "a couple of months", small business sales have been flat or declining over the last 12 months.

"The recent data shows this is now impacting wages growth and a growing portion of small businesses are reducing their workforces.

"It’s clear many small businesses across New Zealand are yet to feel the benefit of the OCR [Official Cash Rate] cuts that began in August, or the income tax cuts that began on July 31," Snelling said.

Xero reports that small business sales fell 2.7% year-on-year (y/y) in the September quarter. This was a bigger fall than the 1.4% y/y fall recorded in the June 2024 quarter.

The latest Xero data shows that, overall,  jobs are still growing in the small business sector, up 6.6% y/y this quarter.

However, "a closer look at the data shows this growth is fuelled by only 27.2% of small businesses," Xero says.

"This is an indication that this job growth is concentrated in an increasingly small proportion of businesses."

Some 31.3% of small businesses are now downsizing their workforce, which Xero says is the highest proportion of firms reducing their workforce since early 2020 when lockdowns were affecting the business landscape.

The hospitality, manufacturing and construction industries were particularly affected in the September quarter, with 45.3%, 34.9% and 33% of small businesses respectively decreasing their workforces over the past year.

Auckland has seen the largest proportion of small businesses shrinking workforces, with 34.1% of firms reducing workforces in the past year.

In terms of sales reductions, the largest declines were in construction (-5.1% y/y), agriculture (-4.1% y/y) and retail trade (-4.0% y/y).

Wage growth slowed in the quarter to be 2.8% y/y, down from the 3.7% rise from last quarter. Xero says wage growth is now significantly less than the pre-pandemic average of 3.9%.  

Snelling says everybody needs "to be doing what we can" to support small businesses during "these challenging economic times". This can be as simple as shopping locally or paying all invoices as soon as possible.

She noted that recent Xero research showed late payments cost Kiwi small businesses $827 million last year.

"We must all do our part, especially the large organisations with unacceptably long payment terms."