Auckland Business – Reality Check

Auckland Business – Reality Check

Business confidence in Auckland is slipping, despite the onset of the spending season expected from the America’s Cup and Christmas-New Year.

Those expecting the economy to deteriorate during the next six months has reached 20%, compared to just 8% in a similar survey last March and 15% last June.

As well, 55% of respondents believe that their own business situation will improve over the same time frame, down from 64% in March and 61% in June.

These are among the main findings of a regular survey of Auckland Chamber of Commerce members on how they view business prospects in the period ahead.

The survey was conducted by internet over the last seven days. Of 650 responses analysed, 42% indicated that they employ 5 or less people, and 43% employ between 6 and 50 in their business.

The overall level of optimism about business prospects over the next six months has dropped by 13% to 27% on the findings of the March survey when 40% said that they believed the business situation would improve over the next six months. In June, 35% of respondents were optimistic that prospects would improve over the next six months.

Meanwhile those expecting the general business situation to remain the same over the next six months has remained steady at 51%, the same as recorded in the March survey.

However, confirmation of a slip in optimism is reinforced by the increase between March and September from 8% to 20% of those predicting the general business situation to worsen over the next six months.

Reinforcing the decline in confidence, the September survey reveals that since March there has been a 9% drop in the number of respondents prepared to predict that their own individual businesses will survive in good shape. Fifty-five percent (55%) of Auckland businesses now believe that their own business situation will improve over the next six months, while just 27% are optimistic about the general business situation improving over the same period (compared to 40% in March).

In response to the same questions in the March survey, 64% of respondents expected that their own business situation would improve over the next six months, while 40% predicted the general business situation would improve over the same period.

Among other findings, the trend of previous surveys of increasing difficulty in locating both skilled and unskilled staff continues:

Thirty-nine (39%) of respondents indicate that finding skilled staff is harder today than three months ago, just 6% say it is easier, and 36% the same. In contrast, in the two previous surveys in June and March, 37% and 36% of respondents indicated that they were finding it harder to locate skilled staff, compared to 7% (June) and 9% (March) finding it easier.

In terms of recruiting unskilled staff, 10% say it is harder than three months ago, 38% say it is the same and 6% easier. In the June and March surveys, 11% and 9% respectively of respondents said it was harder to recruit unskilled staff, while 8% said it was easier in both previous surveys.

In terms of an industry breakdown, the difficulty of finding skilled staff in all areas has noticeably increased. For example:

In trades, 69% of respondents say it is harder to find skilled staff, up 6 points on the 63% recorded in the June survey and compared to the 47% in the survey of August 2001. In manufacturing, 51% are finding it harder to recruit skilled staff compared to 47% in June and 39% in August 2001. In tourism & hospitality, 41% are finding it harder to recruit staff compared to 37% in June and in service businesses, 42% against 36% (June), are finding it harder to recruit skilled staff.

On interest rate trends over the next 12 months, 44% of respondents believe they will rise compared to 80% in the June survey and 60% in March. Forty-three percent (43%) of those surveyed predict interest rates will remain the same over the next 12 months, compared to just 11% in June. Eight percent (8%) believe interest rates will decrease compared to 2% in March.

Both finance and demand continue to be the most limiting factors to businesses expanding their activity. Thirty-one percent (31%) of respondents indicated that demand was the single factor most limiting their ability to expand, the same as in the

June survey. As in previous surveys, finance was the next highest constraint (25%) followed by capacity (15%) and labour (12%).

However, for 72% of SMEs (firms employing between 1 and 10 staff), finance is the most significant constraint compared to 53% who cited demand as the most inhibitive factor to growth.

Commenting, Chamber of Commerce Chief Executive Michael Barnett said that the overall results confirm that business confidence in Auckland is on a gradual slide.

“Even in the knowledge that the economy will be stimulated by the America’s Cup and Christmas activity, it is very apparent that Auckland businesses see the economy deteriorating further over the next six months.”

“Of particular interest in this survey is that the decline in confidence is also occurring within individual firms. Pervious surveys have revealed that a high majority of individual firms have been confident that they are strong enough to respond positively to a prediction of a declining situation. However, this survey reveals that the number of individual businesses is dropping who believe they can stay optimistic despite a prediction of a decline in the general business situation.”

Another huge worry is that it is continuing to get harder to find suitable staff. “The warning about the difficulty of finding suitably skilled staff has been a feature of the survey for the last 2-3 years. Clearly, this survey shows that we are not solving the problem but that the situation is continuing to get worse.”

Clearly, if the role of government is to set a positive environment for business to operate in, then the government has a lot of work ahead. In the area of ensuring there is enough skilled labour to meet the needs of business, this survey shows that the previous Labour-led government made no impact whatsoever.

Building a sustainable growth-led economy will be hampered until the issues around supply of skilled staff are addressed, concluded Mr Barnett.

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