As lockdowns become the new normal, what support should state governments give SMEs hit by snap restrictions?

The latest lockdown in Victoria has put the efficacy of coronavirus relief packages across the states back in the spotlight, as small business groups urge the state government to compensate businesses hit by snap restrictions.

The lockdown, which coincided with Valentine’s Day, the Australian Open and Lunar New Year celebrations, requires all non-essential retail and hospitality businesses to close, with the exception of offering takeaway.

Victorian Premier Daniel Andrews on Monday said “there will be further support” for businesses hit by the state-wide lockdown, which “will be done as quickly as possible”.

“I’m not quite ready to make those announcements but we will do those in good time,” he said.

The hospitality industry alone estimates $100 million in revenue will be lost and almost $30 million in fresh food and produce will be tossed aside.

Compensation for SMEs

Peter Strong, chief executive of the Council of Small Business Organisations Australia, says the Victorian government should “make sure businesses are not out of pocket because of the lockdown”.

Strong says the Victorian government should give $5,000 grants to businesses on top of providing compensation that is equivalent to the amount of turnover lost due to restrictions.

“If they don’t, we’ll see businesses close and jobs lost,” he says.

Australian small business and family enterprise ombudsman Kate Carnell said the government needs to “immediately announce a compensation package” to cover lost stock, food and other “costs associated with running a business, including staff wages and rent”.

What support did other states give to SMEs?

Earlier this month, the Western Australian government announced $500 electricity offsets for eligible Synergy and Horizon Power customers to support small businesses impacted by its five-day lockdown.

Chris Rodwell, chief executive of the Western Australia Chamber of Commerce and Industry, said the electricity offset would help 85,000 businesses.

But Rodwell also noted “it does not come close to covering the full cost of the lockdown”.

The three-week lockdown of Sydney’s Northern Beaches over Christmas and the New Year left many small businesses closed or operating under restrictions.

Nearly one month after the lockdown, the New South Wales government announced small business grants between $3,000 and $5,000.

One critique of the relief package was that it excluded small businesses in neighbouring suburbs which, despite not being forced to shut, still endured a significant decline in turnover.

What do business owners want?

Matej Varhalik, the co-founder of SpeedFit, which operates 22 gyms across Victoria, News South Wales and Victoria, says each five-day lockdown costs almost $5,000 per gym.

With snap restrictions becoming the new normal, state governments should “formalise” a relief package to give small businesses certainty, he tells SmartCompany.

Varhalik says compensation should be as high as “60% of your turnover for any day, on average”.

For the owner of a Melbourne-based real estate technology company, who wishes to remain anonymous, says further support is essential but “must be better allocated and targeted by industries”.

“If you are in travel and hospitality, there is a long-term impact on these businesses until international travel commences,” he says.

Victoria’s five-day lockdown is a response to an outbreak of COVID-19 cases at the Holiday Inn hotel quarantine facility.

However, Premier Andrews said on Monday it was too soon to say if Victoria would move out of stage four restrictions after five days.

“I cannot definitively say where we’re going to be at midnight Wednesday night,” he said.