How would
Australian SMEs
cope with the
predicted recession?

Small Business Loans Australia commissioned a survey of 253 Australian small-to-medium business owners and decision makers to gauge how they would cope in a recession. Respondents were asked to specify how long their business could survive a recession, from less than six months to 18-24 months. As central banks across the world try to lower inflation without creating a recession, SMEs were also asked to indicate whether the impacts of a recession or continually rising inflation would be worse for their business.

Small Business Loans Australia surveyed businesses across different organisational sizes: micro (1-10 employees), small (11-50 employees) and medium (51-200 employees).

Respondents were asked to identify if their business would survive a recession and for how long.

Alarmingly, 34 per cent of respondents revealed they could only survive less than 6 months of a recession.

More than a third (39 per cent) could survive 18 to 24 months of a recessions and just over a quarter (28 per cent) said they could survive six to 12 months of a recession.

Fourteen (14) per cent said their business could not survive a recession at all, however short.

If Australia experiences a recession as a result of reduced spending, do you think your business will make it through to the other side?

Businesses who could not survive a recession at all

Businesses who could only survive less than six months in a recession

Businesses who could only survive 6-12 months of a recession

Businesses that could survive 18-24 months

While Western Australia was least impacted by extended lockdowns over the course of the pandemic, border closures and high COVID cases prevented the numbers of domestic and international tourists that the State’s businesses would normally cater to, and spending among the general population would have likely reduced considerably. Interestingly, Victorian and NSW businesses, which underwent long periods of lockdowns and restrictions, were promisingly more likely to survive six to 24 months of a recession.

Respondents were also asked to choose whether a recession or rising inflation would be more difficult for their business to survive.

More than half (55 per cent) of businesses revealed a recession would pose a greater challenge for their business, while 45 per cent said continually rising inflation would be worse, suggesting both factors will have similarly negative impacts on Australian SMEs.

Continually rising inflation would be worse for larger businesses: 49 per cent of medium businesses chose this response, compared with 42 per cent of small and micro businesses.

Which would be more difficult for your business? A recession or rising inflation?