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‘Business confidence rebounds after difficult few years but tracks down longer term’

While short term business confidence has remained stable, and is currently at its highest since 2020, the longer-term trend is heading in the opposite direction. The latest RFI New Zealand SME Banking Council survey shows that it’s on a downward trend for the next five-to-10 years.

Short-term business confidence for the next 12 months stayed steady at 53%, but that confidence dipped when small businesses were asked about the next five years. When we look further ahead to 10 years out, 51% of small businesses felt confident in May 2023 but only 45% do now.

As the cost of living and inflation remain heavy on many people’s minds, the same goes for small business owners who are having to adapt to the increasingly difficult challenge of doing business in the current economic environment.

With nearly half of all SMEs expecting a decrease in turnover in the next year, the research found the factors that are weighing most heavily on the shoulders of business owners are: 

Economic and regulatory factors, which jumped up 10% since May 2023 

This was followed by concerns about demand and cashflow (25%), also up 10% since May 23);

Staffing still remains an area of concern for 13% of small business owners but is down from 21% in May – indicating that labour shortages are easing. 

More than two-thirds of businesses say supply chain costs (67%) and labour costs (63%) have been increasing, while the need for investment to generate cashflow affects 57% of businesses. Other stressors include cash rate increases (53%) and an expected decrease in turnover in the next 12 months (48%).

While businesses are showing early signs of recovery in recent years full of economic hurdles, small business owners remain cautious, indicating a minor blip in an otherwise downward trend.

Prospa New Zealand Managing Director Adrienne Begbie says that businesses should seek professional advice to create strategies for longer-term resilience.

“These are indeed challenging times and businesses need to identify how they can reduce costs and maximise profits, as well as looking at what support may be available for them. We’ve seen it time and again – businesses that adapt to changing circumstances are the ones that thrive.”

The trend seen in the latest research shows that in some cases small businesses are scaling back their operations to reduce costs (24%), some are seeking professional advice (22%) and others are still negotiating with clients to receive payments faster (20%) to ensure cashflow is steady.


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