6.2 Businesses and COVID-19 Ngā pakihi me te KOWHEORI-19
6.2. Businesses and COVID-19 | Ngā pakihi me te KOWHEORI-19
This section brings together a range of metrics and research on the impact of the pandemic on New Zealand businesses.
6.2.1. Sales, profitability and productivity | Te hokohoko, te huamoni me te māpua
Figure 76 shows business reporting of key metrics between 2007 and 2023, taken from the Business Operations Survey:26 It indicates businesses and sales of goods and services, Their profitability and productivity relative to their competitors, as well as their market share
Sales, profitability and productivity usually move together, whereas market share tends to vary very little year on year. Falling sales mean that, all other things being equal, profitability falls, as some costs (like rents and servicing debt) do not tend to vary in the short run and so the gap between revenue and expenses declines. And if businesses have underutilised resources – capital sitting idle, or staff not working – their productivity will fall.
Businesses reported drops in sales, productivity and profitability in 2020 and 2021. As shown in Figure 63, there were sudden shocks to sales in those years, followed by bounce backs.
Sales, profitability and productivity moved together between 2007 and 2021. More businesses reported increasing sales after 2021, but there was no corresponding increase in the number of firms reporting increases in profitability or productivity in 2022 and 2023.
Figure 76: Performance of New Zealand businesses
Percentage of businesses reporting an increase in performance less the percentage reporting a decrease, by indicator, 2007–2023
Source: Stats NZ, Business Operations Survey
Notes:
1. The Business Operations Survey samples businesses with six or more employees.
2.Businesses were asked for information about the most recent financial year that the business had results available. The data collection period is typically in the second half of the calendar year. For example, in 2023 it was from August to November. A typical 2023 response would have covered the financial year April 2022 to March 2023; other responses will cover different periods, depending on the respondent business’s financial year end and the availability of accounting data.
3.These results are not weighted by business size.
Public health restrictions affected different industries in different ways, as can be seen by the 2021 sales data in Figure 77. More businesses in the accommodation and food services, administrative and support services, arts and recreation services, mining and education and training sectors reported declining sales than increasing sales in 2021. This was not the case for any industry in 2019 or 2023.
Figure 77: Changes in sales by industry in New Zealand, in 2019, 2021 and 2023
Percentage of businesses reporting increases in sales relative to decreases
Source: Stats NZ, Business Operations Survey
Notes: See notes for Figure 76.
6.2.2. Businesses and COVID-19 restrictions in 2020 | Ngā pakihi me ngā here KOWHEORI-19 i te tau 2020
In 2020, the Business Operations Survey included COVID-19 specific questions. These questions were answered by businesses between August and December 2020.
The percentage of businesses that were fully operational fell as the stringency of public health measures increased. Only 20% of all businesses were fully operational at Alert Level 4 (that is, the most stringent lockdown measures).27 One-third (36%) of large businesses (with 100+ employees) were able to operate fully at Alert Level 4, whereas only 18% of smaller businesses (with 6–19 employees) could do so (Figure 78).
Figure 78: Businesses fully operating at different COVID-19 alert levels in New Zealand, 2020
Percentage of businesses reporting they were fully operational at each alert level
Source: Stats NZ, Business Operations Survey.
Notes: The Business Operations Survey samples businesses with six or more employees.
More than half of businesses reported that their domestic suppliers were unable to deliver products to them, and close to half of businesses said that domestic suppliers were unable to produce materials, goods and services in 2020 (Figure 79). Businesses reported fewer disruptions with international suppliers.
Figure 79: Supply disruptions to New Zealand businesses, 2020
Percentage of businesses reporting suppliers unable to produce or deliver materials, goods or services, by level of disruption
Source: Stats NZ, Business Operations Survey.
Notes: The Business Operations Survey samples businesses with six or more employees.
One way of adjusting to the impact of the pandemic and response was for businesses to change the mix of goods and services they offered. The most common response in 2020 was for businesses to reduce their range of goods and services (Figure 80).
Large firms (more than 100 employees) were less likely than other firms to report responding by diversifying the range of goods and services they offered.
Figure 80: Product-range and market responses by New Zealand businesses to COVID-19 restrictions, 2020
Percentage of businesses who reported implementing specified product-range and market measures, by business size
Source: Stats NZ, Business Operations Survey.
Notes: The Business Operations Survey samples businesses with six or more employees.
Businesses also made financial and employment responses to the public health restrictions. The most common financial response was to seek financial support from government programmes such as the Wage Subsidy Scheme. Three-quarters (77%) of businesses reported accessing government financial support. The next-most commonly reported financial response was to arrange a rent reduction or deferment with their landlord – 40% of businesses reported doing so (Figure 81).
Figure 81: Financial responses by New Zealand businesses to COVID-19 restrictions, 2020
Percentage of businesses who reported implementing specified financial measures
Source: Stats NZ, Business Operations Survey.
Notes: The Business Operations Survey samples businesses with six or more employees.
In terms of employment responses, more than half (53%) of businesses in 2020 reduced work hours for their existing workforce, and 30% required or encouraged their workers to take paid or unpaid leave (Figure 82). The survey responses revealed that larger businesses undertook a wider set of employment responses than smaller firms.
Figure 82: Employment responses by New Zealand businesses to COVID-19 restrictions, 2020
Percentage of business who reported implementing specified employment responses
Source: Stats NZ, Business Operations Survey.
Notes: The Business Operations Survey samples businesses with six or more employees.
The public health measures forced many firms to change their business processes. The most common change (79%) made by businesses was to the physical environment of their workplaces to allow social distancing (for example, moving desks further apart). Just over half (51%) of businesses increased, or made new use of, remote work for their employees (Figure 83). As with their employment responses to public health restrictions, larger businesses implemented a wider range of business process changes than smaller businesses.
Figure 83: Process responses by New Zealand businesses to COVID-19 restrictions, 2020
Percentage of businesses who reported implementing specified process responses
Source: Stats NZ, Business Operations Survey.
Notes: The Business Operations Survey samples businesses with six or more employees.
6.2.3. The impact of lockdowns on Auckland firms | Ngā pānga o ngā rāhui ki ngā pakihi o Tāmaki Makaurau
The Commission conducted research into the impact of region-specific lockdowns on firms in Auckland.27Auckland spent close to four months longer in lockdown than most of New Zealand – following on from the nationwide lockdown that started in August 2021. We examined lost sales revenue for Auckland firms using similar Christchurch firms as a counterfactual. The sales revenue was estimated using Goods and Services Tax (GST) data.
Raw sales in both Auckland and Christchurch suggest that the 2020 national lockdown had the greatest impact on both regions and, by implication, the rest of New Zealand (Figure 84). The economic impact of the 2021 national lockdown was smaller than that of the 2020 lockdown. This is consistent with the lower uptake of the Wage Subsidy Scheme (WSS) during the 2021 lockdown (noting that eligibility criteria had also tightened).
While sales fell for both sets of firms in late 2021, Auckland firms shifted from having roughly 4% (0.4 log points) higher sales than similar Christchurch firms in July 2021 to around 8% less than them in September. We do not know what the impact on Auckland firms would have been if COVID-19 had spread in the absence of a lockdown.
Figure 84: Comparison of sales of Auckland and Christchurch firms
Monthly sales from GST data, for firms with positive sales in that month, levels (panel (a)) and differences (panel (b)), April 2019 to March 2024
Source: Royal Commission analysis of Longitudinal Business Database
Notes:
1. In panel (b), a positive difference means that Auckland firms had higher sales in that month than did matched Christchurch firms, and a negative means lower sales.
2. Restricted to firms with positive sales recorded in their GST returns in the month. Christchurch firms weighted using match weights.
3. Shading reflects months with national (green) or Auckland-specific (orange) lockdowns.
We also looked at the distribution of impacts across Auckland firms. We split industries (and the firms within them) according to their initial uptake of the WSS. Table 5 sets out this split, distinguishing between 'low impact' and 'high impact' industries, where low and high refer to the relative extent to which firms in those industry subdivisions claimed the wage subsidy.
Table 5: Initial uptake of Wage Subsidy Scheme by industry classification
Low and high-impact industries, as defined by WSS uptake by firms in those industries
| Code | Industry classification | WSS uptake | Impact |
|---|---|---|---|
| A01 | Agriculture | 0.239 | Low |
| K62 | Finance | 0.363 | Low |
| M70 | Computer system design & related services | 0.365 | Low |
| L67 | Property operators & real estate services | 0.459 | Low |
| K64 | Auxiliary finance & insurance services | 0.505 | Low |
| A05 | Agriculture, forestry & fishing support services | 0.505 | Low |
| M69 | Professional, scientific & technical services | 0.554 | Low |
| Q85 | Medical & other health care services | 0.554 | Low |
| S94 | Repair & maintenance | 0.777 | High |
| C22 | Fabricated metal product manufacturing | 0.779 | High |
| E30 | Building construction | 0.782 | High |
| P80 | Preschool & school education | 0.785 | High |
| E32 | Construction services | 0.794 | High |
| C14 | Wood product manufacturing | 0.791 | High |
| C20 | Non-metallic mineral product manufacturing | 0.792 | High |
| H45 | Food & beverage services | 0.800 | High |
| S95 | Personal & other services | 0.804 | High |
| I46 | Road transport | 0.816 | High |
Source: Royal Commission Phase Two analysis of the Stats NZ Longitudinal Business Database
Notes: Classification of low/high-impact industries based on initial industry-level COVID-19 Wage Subsidy Scheme uptake
rate. Christchurch firms weighted using match weights. Moderate-impact industries not shown.
Figure 85 sets out the estimated effect on Auckland firms' sales, relative to Christchurch firms. The effect is shown for all firms (panel (a)), and separately for firms in low- and high-impact industries (panels (b) and (c) respectively). The effects of the Auckland lockdown were unevenly spread. As would be expected, Auckland firms in industries that had made more use of the WSS experienced larger declines in sales during the Auckland lockdown than their matched Christchurch counterparts.
Figure 85: Modelled difference in sales for similar Auckland and Christchurch firms
Adjusting for observed differences in firm characteristics, April 2019 to March 2024
Source: Royal Commission analysis of Longitudinal Business Database
Notes:
1. A positive difference means that Auckland firms had higher sales in that month than did matched Christchurch firms, and a negative difference means lower sales.
2. Christchurch firms weighted using match weights.
3. Shading reflects months with national (green) or Auckland specific (red) lockdowns.
4. Estimated using month-specific OLS with controls for firm characteristics. Dotted lines are 95% confidence interval for estimated effects (robust standard errors).
The study focused on monthly sales revenue, and did not consider the effect of the lockdowns on indebtedness, job turnover or profitability, which could have longer-term and persistent effects on firm survival.
Research into other economically-disruptive events in New Zealand provides an indication of the severity of the lockdowns on high-impact industries. For example, the immediate effects on sales for those firms in Canterbury affected by the Canterbury earthquakes was slightly smaller than those estimated for Auckland firms during lockdowns, although the negative effects persisted longer following the earthquakes.28
6.2.4. Firm creation and exit | Te whakatūnga pakihi me te putanga
Thousands of firms enter and exit the economy every year. Firm exits tend to be more visible when business conditions are tough. However, often the main driver of declining numbers of firms is the drop off in new firms entering the economy. As the economy looks bleaker, and expectations become more negative, people are less likely to risk starting a business, or they find it harder to obtain the necessary financing. This occurred during the Global Financial Crisis, where there was a long decline in the number of firms entering the New Zealand economy from 2009 through to 2010.
Similarly, the overall number of firms in New Zealand fell during 2020, driven by a decline in the number of new firms entering the economy. The number of firm exits climbed slowly during 2020 and into the first part of 2021, before declining once more (Figure 86).
Figure 86: New Zealand firms, entries and exits
Total number of firms, and 12-month rolling average of firm entries and exits, January 2000 to August 2025
Source: Stats NZ, Business Count Indicators
Notes: Entries and exits averaged over the current and prior 11 months.
The Global Financial Crisis saw large increases in the numbers of firms going into liquidation, administration or receivership. By contrast, these numbers either fell or stabilised in the first two years of the pandemic, before beginning to grow in 2022 (Figure 87).
Figure 87: Company liquidations, voluntary administration and receiverships in New Zealand
12-month counts, January 2002 to December 2025
Source: Companies Office, ‘Latest company statistics’, https://www.companiesoffice.govt.nz/insights-and-articles/latest-company-statistics/
Notes: Graph shows monthly data on the total number of companies going into liquidation, voluntary administration and receivership over the previous 12 months.
25 The Business Operations Survey has a response rate of above 80% and typically has about 10,000 responses representing around 50,000 firms. For more on and results from the Survey in New Zealand, see Productivity Commission, Business by the numbers, (Wellington: New Zealand Productivity Commission, 2024), https://www.treasury.govt.nz/sites/default/files/2024-05/pc-rp-nzpc-business-by-the-numbers-20240227.pdf
26 The Government's public health approach over 2020 and most of 2021 was guided by the Alert Level system. Under Alert Level 4, all people movement and contact is strongly restricted, to contain community transmission and stop outbreaks'. Under Alert Level 3, activities, 'including at workplaces and socially, are further restricted to address a high risk of transmission within New Zealand. As the Phase One report commented, 'Alert Levels 3 and 4 can be understood as "lockdowns" (and this is how they were popularly described at the time): they involved closures of schools and businesses, restrictions on gatherings, and stay-at-home orders'. NZ Royal Commission of Inquiry into COVID-19 Lessons Learned: Phase One, Main Report (2024), Part 2 Section 2.4.3, https://www.covid19lessonslearned.royalcommission.nz/reports-lessons-learned/main-report/part-two/2-4-what-happened-pandemic-strategy-and-tools
27 See the Appendix for the disclaimer that applies to this research, and for further information on the methodology used.
28 See, for example, Richard Fabling, Arthur Grimes and Levente Timar, 'Natural selection: Firm performance following the Canterbury earthquakes', Motu Working Paper 14–08, Wellington: Motu Economic and Public Policy Research, 2014), https://motu-www.motu.org.nz/wpapers/14_08.pdf
Richard Fabling, Arthur Grimes and Levente Timar, 'Natural selection: Firm performance following a catastrophic earthquake' in Kamila Borsakova and Peter Nijkamp (eds), *Resilience and urban disasters* (Cheltenham: Edward Elgar Publishing, 2019), pp 30–50
Richard Fabling, Arthur Grimes and Levente Timar, 'Emigration and employment impacts of a disastrous earthquake: country of birth matters'. *Regional Studies*, Volume 57, Issue 12 (2023), 2491–2502.