New Zealand SMEs have revealed a sharp downturn in confidence both in the economy and their own operations, with falling revenue and growing pressures being cited as key concerns, according to MYOB’s latest Business Monitor Snapshot.
The construction and trade services sectors have been the hardest hit, however the finance sector has remained buoyant with 70% of finance and insurance respondents saying their business revenue had gone up over the last year, compared with 37% of overall respondents.
60% also expected their revenue to go up over the next year compared to 46% of all respondents, and 40% expected the New Zealand economy to ‘improve slightly.’ By contrast, 47% of construction and trade services sector respondents saw their revenue fall, and only 18% reported growth.
MYOB says this is a ‘significant reversal in confidence’ from prior to the 2017 election, where 42% of business owners were confident that the economy would improve.
Nonetheless, general manager Carolyn Luey says that businesses are not panicking just yet.
“New Zealand’s economy continues to tick along, and while more businesses are seeing their revenue fall, it is worth remembering this is against a background of a sustained period of growth,” Luey said.
“However, we should take these signs seriously. Clearly business operators are now factoring in not only tougher economic conditions, but also a tightening of their own finances. This will have a flow-on effect throughout the economy, from hiring and investment to payment and purchase arrangements with fellow businesses.”
Auckland and Christchurch saw the largest proportion of revenue fall, with approximately a third of SME operators recording a decline. Only 19% of Auckland operators recorded a gain, along with 15% in Christchurch.
Luey says now is the time for businesses to start planning accordingly, and that these alarm bells should not be ignored.
“Businesses should be taking a prudent look at where they will be if this downward trend continues through next year, or external factors bring about a more abrupt reversal for the economy,” she stated.
“Even if your business is going along nicely, it pays to plan for what you would do if fortunes change for your customers or suppliers. Your best bet in doing this is to get advice and do some scenario planning with your accountant or financial adviser.”