Small businesses owners continue to suffer a COVID hangover, with many who are struggling to pay off accumulated financial and tax debts developed through the last 2 years of COVID, now struggling and dipping into their personal finances to cover rising costs of essential electricity services.
New research into the impact of small business energy policy has found a third of Australian small businesses are experiencing energy hardship due to the COVID-19 pandemic, which has left one in five with an energy service debt.
The research project from the Council of Small Business Organisations Australia (COSBOA) surveyed 408 small business owners to investigate the impacts of energy policies and advocate for better energy consumer protections. The project was funded by Energy Consumers Australia Limited as part of its grants process for consumer advocacy projects and research projects for the benefit of consumers of electricity and natural gas.
As well as revealing energy hardship, the survey found only 1 in 2 small businesses have returned to being fully operational, with 43% still operating below capacity, and another 3% still temporarily closed.
The research also found:
40% of small business owners reported being in a worse financial situation personally because of the impact of COVID on their business and their ability to pay essential bills such as energy.
A third of small business owners delayed paying their energy bills, leaving 1 in 5 owners with an energy service debt which they are still paying off.
Energy hardship was more acutely experienced by larger small businesses with more than 20 staff (41%), businesses operating with an embedded network or shopping centre (56%), newer small businesses (59%), and businesses struck by temporary closures (69%).
COSBOA CEO Alexis Boyd said the impact of COVID-induced energy hardship will be long-term following two years of pandemic conditions that kept many customers at home.
“Right now, small business owners across the country are grappling with how to pay down legacy bills leftover from COVID shutdowns and slowdowns,” Ms Boyd said.
“It’s a double hit, as they are trying to rebuild right as operating costs such as petrol prices and electricity are skyrocketing, supply chains are significantly impacted, and an acute worker shortage makes it nearly impossible to grow revenues.”
“The COVID hangover, including debt from energy bills incurred during the pandemic downturn, is a handbrake on the recovery of the Australian economy because half of Australia’s 2.4 million small businesses have not returned to full operations and support is needed to get them back to capacity.”
Energy Consumers Australia CEO Lynne Gallagher said the research demonstrates the need to set the right policy conditions to support small businesses to manage energy bills as they emerge from the pandemic, and other future economic shocks.
“The research clearly shows that flexibility to pay bills, proactive support and better communication from energy providers are all extremely helpful to supporting small business during difficult times like the COVID-19 pandemic,” Ms Gallagher said.
“The surprising lesson from the research was the number of small businesses that were wary of asking for help and labelling themselves as being under financial distress, with the embarrassment and stigma preventing them from accessing support that was already available.”
Ms Boyd added “There’s work to be done in helping remove that stigma, and the role of direct and independent advice will be essential to achieving that – including awareness raising by bodies like COSBOA and its member associations.”
The survey revealed businesses in New South Wales were significantly more likely to have suffered energy hardship despite longer lockdowns and border closures in neighbouring states.
While half of all small businesses experienced lockdown disruptions, two thirds experienced temporary closures, which is one of the strongest indicators of energy hardship.
This disruption contributed to a significant hit to business bottom lines, with two in five small to medium enterprises reporting high declines in sales and profits.
Energy hardship was felt most profoundly by heavy energy operators and in businesses where electricity demands continued even if customers were hibernating or locked down.