'It's getting really hard for me': Auckland businesses still counting the cost of a woeful summer

Auckland rug shop owner Majid Bayat says he pretty much lost everything in January's floods.

Bayat has two outlets of his Aladdin Rugs business in Auckland, one in Ellerslie and one in the hard-hit Wairau Valley.

“We suffered a lot,” Bayat says. “Over $100,000 [in losses]. And unfortunately, we didn’t have insurance.”

He says everything “went under the water”. Without stock to sell, the business can’t bring in any money. Bayat says he is in the process of asking his bank for a business loan.

With a large mortgage, four children and a struggling business, he doesn’t want to take on more debt but “we have no choice.”

“We have to restock.”

Bayat’s business is one of more than 1900 Auckland businesses that were given a cash boost from the Government’s Back to Work grants scheme for flood and cyclone-affected firms.

Aladdin Rugs received $10,000. Bayat says he is grateful, but the money didn’t cover the cost of the cleanup.

The timing of his business woes couldn’t be worse. Bayat says this is usually the busiest time of year for rug sales, as temperatures drop and we head into winter.

But he hasn’t seen a boost in sales, or benefited from people replacing flood-damaged rugs.

Quotes to replace rugs through insurance claims have been flying out the door. But the sales are not following that demand, Bayat says.

Could it be insurance companies are yet to approve the claims, he wonders.

“This year has been really challenging already. And then the storm makes everything worse. Everything is so quiet. Even online — we used to sell about $100,000 online a month. Now we are barely selling anything, like one or two rugs a week or something.”

He says he would like to advertise, but where does the money come from? Not advertising means missing out on even more potential sales. And his business spending less money then affects other businesses, he says.

Bayat says rising interest rates are not only hammering his customers, but his personal finances too.

“It’s getting really hard for me … I don’t know where I am going now at the moment.”

Auckland Council Chief Economist Gary Blick says it’s clear Auckland has been made materially worse off by the damage to its asset base, and to the wellbeing of people directly affected.

“The investment and consumption activity in the aftermath is about repairing, remediation and replacing what we already had. But capacity constraints and the limits to our funds mean that resources will be reprioritised and other projects, and their associated benefits, will be deferred,” he says.

The last straw

The Auckland Chamber of Commerce helped to administer the Back to Work fund for the Government. It says it paid out about $5.9 million to Auckland companies by the middle of April.

It's a long list of hurting businesses. Cafes, motorcycle shops, maintenance firms, a hot yoga company. 

Some, like Bayat got $10,000. A handful of firms got $40,000 or $20,000, while many got $5000, or $2000.

A business owner in West Auckland, who Interest.co.nz has agreed not to name, said the $2000 it got for the cleanup was helpful, but a drop in the bucket of what it had cost to get back up and running. 

But it was also nice to be “seen”. To be acknowledged, she said.

To be eligible for a grant a business had to be in the Auckland region, be affected by the floods or Cyclone Gabrielle, and face significant cash flow issues. Decisions on how much a business got were based on the number of employees and the scale of damage, the chamber says.

But its not all small businesses like Bayat's on the list. The company which owns Sea Life Kelly Tarlton's Aquarium got the highest amount available for its business of $40,000.

In January it opened a new $1.6 million attraction.

It is owned by Merlin Entertainment, a multi-billion pound global listed entertainment giant that owns attractions in more than 20 countries, including Legoland. Merlin also received a $500,000 grant from the government's controversial $290 million Strategic Tourism Assets Protection Programme which was investigated by the Auditor-General.

The chamber had two tranches of money from the government to distribute, the first of about $3m allocated in February and another $4.6m tranche that came after the government saw the demand, chamber chief executive Simon Bridges says.

He says for some businesses the floods have been "kind of like a last straw."

"These days a lot of people in businesses who are kind of like, floods, cyclones, what are they talking about, we're just getting on with life. And that's okay. And they won't be affected by inflation, or the interest rate picture, or generally low confidence, but they weren't hit by the floods or the cyclone. But of course what's also true is that a smaller group that have been affected, they've been horribly affected."

Bridges says for many the summer has been a let down. After the interrupted Covid-lockdown years, there was hope it would be back to business as usual in 2023, and a bustling summer period with full cafes and events and lots of spending.

The bad weather put paid to that, with the flooding and cyclone but also just a "lousy" summer prompting people to stay home, he says.

That weather impact can be seen in the kinds of businesses asking for help, Bridges says. Construction, hospitality, retail and restaurants the sectors topping the list.

Bridges says the grants won't make weather-hit businesses whole, and won't make up for an insurance short-fall.

"Potentially [the business] might have got $2000, or $5000 and a very small handful of cases got $20,000 or $40,000 to keep them to keep them moving and get cash flow moving. And it won't be a perfect policy, because in a sense, these sort of instances they never are. But I think at that level it has had some some successes."

There is still about $1m available for Auckland businesses.

"So keep applying," Bridges says.

While it was a high trust scheme, there will be random audits of the grants to ensure they went to those who needed them, Bridges says.

Mental health support was also part of the Back to Work scheme, with $1m allocated to the First Steps counselling programme to cover three one-on-one support sessions with a approved mental health and wellbeing provider.

The chamber is also hosting an online event with "resilient expert" Lucy Hone next week. Bridges says the chamber had about 400 registrations for the session with little publicity.

"I think that shows us as a very real part of what's going on, much of it is real and tangible and sensitive."

Alongside the poor weather, the rise of the minimum wage and escalating costs are heaping more pressure on firms.

The minimum wage increase has been weighing on Bayat's mind. He says it is now him and his wife and only one staff member where before they had several staff.

"Even if you can find someone for $24 an hour, people aren't happy. We just can't afford it."

There is one pressure release.

In terms of tax, Inland Revenue is giving flood-affected businesses a grace period.

A spokesperson for IR says since January it has seen an increase in taxpayer contacts related to the floods and other weather-related distress.

“Inland Revenue has been advising people in flood-affected communities that they should focus first and foremost on dealing with the effect of the floods rather than tax. So, we expect discussions about tax relief and hardship with affected taxpayers, and or their tax agents, may still be several weeks away.”