Big Energy And Transport Cost Increases For Business Will Flow Through To Customers As Well

Executive Director of ExportNZ and ManufacturingNZ, Catherine Beard, says a survey of 87 large, medium, and small businesses, shows big increases in electricity, gas and transport costs hitting them. 74% of respondents said they will have to pass cost increases onto customers.

The survey of businesses conducted in June, found 40% of respondents had experienced increases in electricity prices in the last 12 months and over 62% expect them to increase in the next 12 months. The average electricity increase was 75.7% and the median increase was 35%.

Catherine Beard said the big differences in average and median price increases was due to some extremely high increases experienced by some respondents, and these tended to be the larger businesses with over 100 employees.

Catherine Beard said in addition to increases in the electricity prices, 25% had experienced an increase in gas prices over the last 12 months and 35% were expecting increases in the next 12 months, with the average price increase being over 50% and the median 12%.

"As with electricity there were some extremely high price increases affecting the larger gas users with the larger employee numbers and some (8.5%) said they had difficulty securing gas contracts at all".

Nearly half of respondents (48%) said the increased energy costs had a middling to significant impact on their business.

When it came to transport costs, the increase in costs for imports has on average increased by 124%, with a median of 45% and for exports the average increase in transport costs was 77% (30% median). The increase in storage and inventory costs was 23% (15% median).

When asked about strategies to cope with the price increases respondents said:

-74% would put prices up for their customers

-42% would absorb the increased costs, but reduce business activity

-22% would reduce staff numbers

-8% said they would offshore manufacturing to a more competitive country

-3% would close

In addition, some of the larger energy users are frequently stopping production.

Catherine Beard said businesses have been struggling to cope with these extra costs for some time now and there is only so long they can absorb the extra costs before they have to put their prices up or make alternative plans.

"For manufacturing to have a good future in New Zealand, we need to ensure policies that deliver reliable, competitive, affordable low emission energy and transport options - as with everything else, diversity of supply will be the key enabler.

"Gas is an important transition fuel to a low carbon economy and should be part of the plan and Covid19 has shown us we need to think hard about resilience for our transport options, being so far from our markets."

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