Small businesses battered by Covid restrictions see return to pre-pandemic sales

Small businesses are seeing their sales slowly creep back toward pre-Covid levels, but sectors such as hospitality and arts and recreation still have a way to go.

An analysis of the records of hundreds of thousands of companies shows that the health of small businesses has remained steady.

However, despite the easing of lockdown restrictions mid-month, year-on-year sales growth in May was slower than in April, the Xero study found.

Hospitality and arts and recreation continue to be the sectors most heavily affected by Covid restrictions, even after adjusting for low 2020 results. 

While results for hospitality were the most promising since August 2020, sales have been slow to rebound and jobs remain down over 20 per cent year-on-year.

In contrast, retail and the information media and telecommunications sector reported healthy growth. 

Small business jobs continued to fall up to May 2021, but did so by a smaller margin than in April. This recent improvement matches government data published this month, showing that the number of people on furlough fell to its lowest since the start of the pandemic.

Gary Turner, managing director at Xero, said: “Small firms have still got a fair way to go to get back to 2019 growth, but this data shows that recovery is underway. 

“The vaccine rollout is paying a dividend, particularly for hospitality, and we expect this to strengthen and boost growth in the second half of year. We do have to be cautious in our optimism should more restrictions be enforced in the colder months, but as things stand the outlook is positive.”