Businesses back immigration reductions as economy steadies

26 April 2017 - for immediate use

Businesses back immigration reductions as economy steadies

· 43 percent of SME owners believe immigration policies are not stringent enough

· Five percent reduction in businesses expecting economic conditions to improve

More New Zealand business owners back cuts to immigration levels over those that want to keep current settings according to the latest research by leading accounting software provider MYOB.

MYOB’s Business Monitor survey of the owners of 1,015 small to medium sized enterprises found that 43 percent believe New Zealand’s immigration policies should be tightened, one-third believe they are just right and just 11 percent say they are too stringent.

MYOB General Manager Carolyn Luey says the economy clearly benefits from additional workers coming into the country, but concerns about the impact on public services and housing are likely behind the current high level of concern.

“It’s a very tricky issue for New Zealand. Businesses need skilled migrants to bring in the expertise and experience needed to help them grow and to fill shortages, yet a large number of business owners would like to see policy tightened up,” says Carolyn Luey.

The finding comes on the back of steady economic activity in the sector with a five percentage-point fall in confidence in the prospects for the wider economy, down from 46 per cent in September 2016 to 41 per cent in the latest survey, with one-in-five businesses saying general economic conditions will get worse.

Overall the numbers are still positive, although they mirror other research showing a slight softening in sentiment across the economy says Ms Luey.

The proportion of SMEs reporting increases in revenue fell back to 36 per cent – from 39 per cent last year. At the same time, several of the country’s key sectors continue to see strong gains.

“What our latest data highlights is the real positivity in some key sectors. Given the housing crisis being felt in many parts of the country, it’s no surprise that the construction and trades sector continues to be our best performer,” she says.

“But what is perhaps most significant is the growth we are seeing in the local SME manufacturing sector, which not too long ago was being written off for dead. The retail and hospitality sector is also continuing its bounce-back, with above average growth over the last 12 months.”

Forty-four per cent of SMEs in the construction and trades sector are reporting an increase in revenue over the last 12 months, along with 43 per cent of manufacturing businesses and 38 per cent of retail and hospitality operations.

“What’s particularly encouraging about the performance of these sectors is that not only is it looking sustained, but the gains those businesses are making are being passed on to Kiwi workers in terms of both wage growth and job opportunities.”

Over half (54 per cent) of construction and trades SMEs expect to continue growing over the next 12 months. The manufacturing sector (44 per cent) and the retail/hospitality industry (40 per cent) are also confident of continued revenue gains in 2017.

According to the MYOB Business Monitor survey, almost a quarter (22 per cent) of retail and hospitality operations intend to increase their full-time staff roster this year, and 37 per cent will raise wage and salary levels. More jobs will also be available in the trades and construction (18 per cent) and manufacturing (17 per cent), while a significant proportion of both sectors will also be paying staff more in 2017 (manufacturing: 35 per cent; construction/trades: 27 per cent).

Growth continues in the regions

“The other positive feature of our latest research is that growth is remaining widespread across New Zealand,” says Ms Luey.

In contrast to recent Business Monitor surveys, when growth in the three main centres outstripped the rest of the country, 38 per cent of businesses in the regions are reporting increased revenue over the last 12 months, compared to 36 per cent in Auckland, 34 per cent in Wellington, and 32 per cent in Christchurch.

“Star performers are places like the Waikato, Northland and Otago/Southland, where revenue returns are well above the national average. This is really good news for communities that have not seem the same levels of growth over the past five years as their big-city counterparts.”

Forty-seven per cent of SMEs in Waikato reported revenue growth in the year to March 2016, 45 per cent in Waikato and 41 per cent in Otago Southland.

Consistent growth ahead but pressures rising

Ms Luey says, based on the research, SME performance should remain steady over the coming year, with 38 per cent of SMEs expecting revenue growth in the next 12 months.

“This is underpinned by a strong work pipeline for this quarter, with 41 per cent of all SMEs reporting more work booked over the three months to June.

“However, slight increases in competitive pressures, the impact of rising fuel prices and an increasing squeeze on cashflow and margins mean that local SMEs need to keep a careful watch on key performance indicators.

“The best way to do that is by using the up-to-the-minute reporting tools available in your accounting software and by keeping in regular touch with your accounted or trusted financial advisor,” she says.

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