More redundancies coming, says Nicholls

This week was a significant line in the sand for redundancies as wage subsidies ran out for many businesses, Otago Southland Employers’ Association chief executive Virginia Nicholls says.

A second wave of restructuring and redundancies is expected when the extension to the Government’s wage subsidy scheme comes to end in August, she said.

This comes as a number of Southland employers, including retailer H&J Smith, Distinction Hotel Group and the Invercargill Licensing Trust, announced redundancies because of Covid-19 pressure in recent weeks.

The association and its team of lawyers had been fielding a continuous stream of calls from businesses seeking advice since the beginning of the Covid-19 lockdown, Nicholls said.

‘‘It started to hit almost immediately,’’ Nicholls said. ‘‘Suddenly they were without income.’’

Restructuring decisions were difficult for many employers to make, Nicholls said, but it was important that they kept their business viable so they could employ people again when the economy stabilised.

Nicholls said the wage subsidies had been a saviour for businesses, but noted that the scheme didn’t cover related costs such as ACC and holiday pay obligations.

The extended wage subsidy is available to businesses with a 40 per cent reduction in turnover.

‘‘This provides them with time to take a breath and consider their future,’’ Nicholls said.

While tourism and hospitality were the hardest hit, all businesses had changed since Covid-19, she said, as they tried to establish what customers needed going forward.

It was too early to tell how many redundancies Southland would face because a number of organisations were helping with restructuring advice, Nicholls said.

‘‘We don’t have a handle on it yet, but it’s significant,’’ she said.

It was also too early to tell when companies would be in a position to rehire because they were between seasons, Nicholls said.

She hoped the cold weather was a sign of a great upcoming ski season, which had the potential to attract visitors beyond the ski slopes.

‘‘Hopefully they’ll go further afield,’’ she said.

The diversity of Southland’s economy would be its saving grace, Nicholls said. Its strong agricultural sector supported a strong manufacturing sector, she said, listing big employers such as Fonterra and Alliance Group.

The latest Performance of Manufacturing Index (PMI) results for Southland and Otago show an encouraging rise from 20.8 points overall in April to 38.9 in May, but Nicholls wasn’t too excited as scores needed to hit 50 before the industry was considering to be expanding.

‘‘Because we’re in decline, it’s not something I’m jumping up and down about,’’ she said.

The two regions scored 53.2 in the index in May last year.

With the country’s move to alert level 1 this week, she expected the June PMI to paint a clearer picture of the current economic climate.

‘‘I’m looking forward to the next month’s numbers,’’ Nicholls said.

‘‘We don’t have a handle on it yet, but it’s significant.’’ Virginia Nicholls Otago Southland Employers’ Association chief executive, on the job loss forecast for Southland