Tough Quarter For Construction And Trades

Falling Confidence Reflects Tough Quarter For Construction And Trades – MYOB Business Monitor

Confidence in an economic recovery over the next year has fallen more than 10% for the construction and trades sector since November 2009 – down from over half of all business owners in the industry (52%) to 41%, according to the April MYOB Business Monitor, released today.

The MYOB Business Monitor is a nationwide survey of over 1,000 New Zealand business owners, across a range of small and medium businesses, from sole traders to mid-sized companies, and representing the major industry sectors. The MYOB Business Monitor is designed to research key areas of business performance, including profitability, cash flow and pipeline work, as well as business confidence.

MYOB New Zealand general manager Julian Smith says the fall in confidence – one of the sharpest of any sector – reflects the tough conditions many business owners in the building sector are reporting for the end of the 2009/10 financial year.

“We have definitely seen a marked drop in confidence since before Christmas, “ says Julian Smith.

“And looking at the true revenue and profitability figures for the industry, what may be surprising is that confidence has remained as high.”

According to the MYOB Monitor, 42% of construction and trades business owners across the country report a fall in revenue over the last 12 months, compared to only 21% reporting a revenue gain. This is compared to an average of 35% of all New Zealand business owners who have seen revenue fall in the past year. Of construction and trades sector businesses reporting a decline in revenues, over half saw their income fall by between 20 – 29%.

Profitability also made a rapid decline over last quarter for construction and trades business owners, with 49% reporting profits down over the past 12 months, compared with 35% in the November Monitor.

Of all the sectors surveyed in the Monitor, the construction and trades sector also reported the largest fall in employment, with 18% of business owners needing to reduce staff numbers over the last year, compared to a national average of 11%.

“The short-term prospects for the industry are also not much improved, with pipeline work not showing the same growth trends we are seeing in other industries,” says Julian Smith.

In terms of work confirmed or planned for the next 3 months – one of the key indicators in the MYOB Monitor – 18% of construction and trades sector business owners reported a lot less work coming up, and 28% a little less; a total of 46% expecting less work up to June, compared to 23% of all businesses nationally.

“While it’s clear that business isn’t going to pick up for the sector in the immediate future, the trend seems to be one of gradual improvement over the longer term.”

“Less than half (44%) of all construction and trades business owners expect their profitability to improve this year. However, business owners across the country are expecting growth by the end of the year, and this should flow on into the sector.”

“The key will be to focus on doing the basics well – managing costs, controlling cashflow and getting the right expert support to ensure business sustainability until the situation improves.”

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