NZ business outlook positive

NZ business outlook positive amid weakened global profitability expectations

14 November 2017

New figures from Grant Thornton’s quarterly International Business Report (IBR) survey of 2,500 companies in 35 countries reveals that nine of the world’s ten largest economies have reduced profitability expectations over the next 12 months.

However, in New Zealand, the proportion of businesses surveyed that expect profits to increase is up 72% in Q3 2017 from 60% in Q2. The country sits second equal with Australia in a league table of countries surveyed, behind Nigeria (84%).

Globally, the proportion of businesses who expect profits to increase over the coming 12 months has fallen, down from net 47% in Q2 2017 to 42% in Q3. Most notably, of the world’s ten largest economies, the outlook on profits has weakened in Germany (-25%), Brazil (-16%), India (-15%) and the US (-10%).

Paul Kane, Partner, Privately Held Business at Grant Thornton New Zealand says, “Globally, the reduced profit outlook has arisen from concerns about the growing lack of access to skilled workers. Nearly forty percent of business leaders worldwide say this constraint now weighs on their firms. This is the highest figure ever recorded within the Grant Thornton IBR survey, and this trend is visible across most regions”.

The survey revealed that New Zealand, currently sitting at 36%, has similar concerns over access to skilled workers despite a slight decline in Q3.

“Our research demonstrates that concerns over access to skilled workers in New Zealand tends to fluctuate, so there is every chance that we could follow the rest of the world into decline; it’s important for business owners to learn from what’s happening overseas as the situation is becoming quite acute.

“Globally we’re seeing fierce competition among companies as they compete for skills – both to retain those they already have, and to recruit the additional people they need.

“This will put profits under pressure as wage bills rise to try and tackle the skilled worker shortage; but in time, this will limit business owners’ abilities to invest in future long term growth, and this in turn may drive up the costs of goods and services which creates inflationary pressure.

“While Kiwi businesses are currently in a good position to start planning for the coming months and years, it’s critical to acknowledge these pressures and ensure there’s a balance so that other investments are not abandoned altogether”, says Kane.

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