Christmas cheer is in short supply as almost nine in ten regional small businesses are worried about navigating the holiday period including due to rate rises, post office closures and fuel hikes

New research from Australia’s leading online small business lender, Prospa, reveals that small businesses outside of Australia’s capital cities are slated to be hit financially, with a third rating their overall business health in the current landscape as poor.

The new findings come from the latest “SME Sentiment Report” conducted by YouGov and commissioned by Prospa which surveyed around 500 small business owners and primary decision makers across Australia. The report highlights growing concerns from the small business community on their business viability heading into the busy holiday period, and a yawning financial gap between metropolitan and regional businesses due to economic pressures.

Small businesses outside of major capital cities bearing the brunt

Following the news that Australia Post plans to cut up to a third of its postal outlets across the country over the next 12 months, combined with the added pressure of rapidly rising goods and services costs, small businesses based outside of capital cities are disproportionately feeling the pinch. In fact, among those businesses who have concerns going into the holiday period, regional businesses are more likely than capital city-based businesses to say they are worried about the rising cost of goods or services (73 per cent compared to 64 per cent).

Additionally, over two in five (43 per cent) regional businesses say they don’t feel optimistic about the economic outlook for the next 12 months. When comparing outlook between metro and regional businesses on a state level, Queensland is a prime example of a clear divide. While three quarters (74 per cent) of capital Brisbane-based businesses feel extremely or somewhat optimistic about the economic outlook for the next 12 months, under half (47 per cent) of regional businesses in Queensland feel the same.

Small businesses not so festive this holiday shopping season

Nearly nine in ten (86 per cent) Australian small businesses are experiencing mounting worries as they gear up for the seasonal rush. The top three concerns cited by respondents are the rising cost of goods or services (58 per cent), rising cost of utilities (48 per cent) and lower than expected consumer spending (36 per cent).

Many small businesses are forecasting this month’s rate rise from the Reserve Bank Australia could further dampen consumer confidence and spending, particularly in the retail and hospitality sectors. In fact, those working within the hospitality and retail industries are three times more likely to say they feel not at all optimistic about the economic outlook for the next 12 months compared to those working within beauty and health (17 per cent compared to 6 per cent).

Lack of access to or slow funding is stunting business growth

As inflation figures continue to hang heavy over small businesses and as late payment times averaged over three weeks in September, the need for financial support is growing. While over half (53 per cent) of Australian small businesses have sourced business funding from a traditional bank in the past, around the same amount among these respondents (48 per cent) say the process was slow, highlighting the need for increased education around faster and more accessible alternative finance solutions.

Nearly a quarter of Australia’s small businesses are preparing to access funds, averaging $24,903 among those expecting to do so in the next 12 months. On a national scale, this is equal to 524,000 small businesses with a collective borrowing power of AUD $13.0 billion on average, all being channelled into the local economy.

The report further reveals that two in three (66 per cent) respondents would make changes to their business now if they had the funds. Among these respondents, the top three changes include adopting new technologies to improve efficiencies and customer service (52 per cent and 43 per cent respectively) and adapting operations to support growth (39 per cent). Other priorities include hiring to bring in new skills (30 per cent), providing training to increase skills in the team (28 per cent), and updating operations to solve existing problems (23 per cent).

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Report Methodology

The SME Sentiment Report study was conducted online between 10th – 18th October 2023. The sample consisted of a nationally representative sample of 502 Australian business owners and primary decision makers of businesses with fewer than 50 employees. For brevity, these respondents will be referred to as ‘small businesses’ throughout this release. YouGov designed the questionnaire in consultation with Prospa. Following the completion of interviewing, the data was weighted by business size and location, and the sample is representative of the Australian population aged 18+ who are business owners or primary decision makers of businesses with fewer than 50 employees (approximately 2.3 million Australian adults). All figures, unless otherwise stated, are from YouGov Plc.