Red tape major hurdle to growth for NZ businesses

4 February 2010
 
 
Red tape major hurdle to growth for NZ businesses

Worries over the ever-increasing amount of red tape New Zealand businesses are required to negotiate is hampering their growth, according to the findings of the latest Grant Thornton International Business Report.
 
While last year one of business’ primary concerns was a shortage of orders, this year they rate red tape and regulation as the major constraint.
 
The survey, which canvasses the opinions of medium to large privately held businesses, found that 33% of New Zealand businesses see regulations as the biggest impediment for growth, a frustration shared with Australia (35%).

Peter Sherwin, a partner at Grant Thornton New Zealand, said the surprise was that in this country red tape was a greater concern (33%) than reduced demand for product or services (30%). This compares to last year’s figures of 41% and 53% respectively.
 
Globally, businesses think that regulations/red tape is the second biggest major constraint (32%) behind shortage of orders/reduced demand (39%), but not in New Zealand.
 
“Last year the hindrance of red tape to businesses was over shadowed by the bigger picture but this year it’s back as a leading irritation which is a major disappointment in that nothing has changed – even with a far more business savvy government.
 
“The Government keeps forcing more red tape on businesses, which are already struggling to come to terms with the deluge of regulations. It’s a real disincentive for entrepreneurial companies, which actually need a more simplified system in which to operate. Instead we just get more red tape.”
 
Sherwin said the Emissions Trading Scheme was a prime example of legislation with which businesses are struggling to understand.
 
“What does it actually mean for them? With increasing red tape comes confusion and the need to better educate the business community. At the moment there seems to be a real knowledge gap as the landscape is ever-changing.”
 
Sherwin said that compliance costs and other obligations continued to constrain businesses, especially those in the property and construction sectors. He believes government should move to a less intrusive compliance and tax system with more emphasis on GST and a reduction in income tax.
 
“Under Labour we had a government who didn’t fully understand business and it was not too interested in understanding it. Now we have a government with a far better understanding but yet we haven’t had a great deal of discussion or change.
 
“I think what we need is a total refresh of what we are trying to achieve in New Zealand. What do we want to support, nurture and grow?”
 
Sherwin said that 2010 would definitely be the test for government. “National was elected on a platform of the need for change. But from business’ point of view, the expectation is high. The status quo will only be tolerated for so long.”
 
The survey looked at six areas of constraint on a business’s ability to expand. Compared with last year, regulations and red tape was the biggest concern at 33%, reduced demand at 30% followed by lack of skilled labour (27%), shortage of working capital (19%), cost of finance (14%), and shortage of long term finance (11%).

The International Business Survey covers more than 7400 respondents in 36 economies. A privately held business includes businesses such as entrepreneurs, family businesses and non-listed entities, which account for over 98% of businesses worldwide.

On the global arena it found that businesses are more positive regarding access to finance with the percentage of businesses expecting finance to become less or much less accessible falling 34 percentage points from 2009.

Most businesses (69%) expect lenders to be supportive or very supportive towards their business; however, businesses don't expect this support to be greater than in 2009 as the percentage of businesses expecting lenders to be supportive or very supportive is exactly the same in 2010 and 2009.
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