29 Oct 2018

SME confidence collapses as revenue falls sharply

10:14 am on 29 October 2018

The confidence of small businesses has fallen to low level amid growing economic uncertaintly, rising fuel prices and falling revenue.

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Photo: nito500/123RF

A survey by accounting software company MYOB, found 53 percent of small and medium sized business operators (SMEs) questioned believedthe economy will decline over the next 12 months, compared with 42 percent surveyed prior to last year's election.

Nearly a fifth expected a sharp contraction in the economy, while 27 percent expected the economy to improve next year.

That was a turnaround from a survey taken just before last year's election which indicated 42 percent of SMEs were confident the economy would improve, while 23 percent expected a decline.

MYOB said SMEs were concerned about changes to government's policy and rising fuel prices, which underpinned the worst drop in reported earnings since the GFC.

It said 26 percent had reported a drop in revenue over the past year, with 47 percent reporting flat earnings.

MYOB said it was the first time in more than seven years that more businesses reported revenue falls than gains, which compared with a 37 percent increase last year, while 18 percent reported a drop.

However, MYOB General Manager Carolyn Luey said business operators were not showing panic, although mid-sized businesses were doing better than smaller ones with less than 20 staff.

"New Zealand's economy continues to tick along, and while more businesses are seeing their revenue fall, it is worth remembering this is against a background of a sustained period of growth," she said.

"However, we should take these signs seriously. This will have a flow-on effect throughout the economy, from hiring and investment, to payment and purchase arrangements with fellow businesses."

She said the hardest hit sectors were construction and trade services.

But the manufacturing sector was holding up, with 53 percent reporting year-on-year revenue gains, while the finance and insurance industry reporting 64 percent gains.

A third of SMEs in Auckland and Christchurch saw revenue fall, while Wellington bucked the trend.

Auckland-based businesses were expecting the declining revenue trend to deepen next year, with 38 percent of operators forecasting a drop in sales, compared to 33 percent in Christchurch and 25 percent in Wellington - the only main centre where revenue gains were expected to outstrip falls.

"Businesses should be taking a prudent look at where they will be if this downward trend continues through next year, or external factors bring about a more abrupt reversal for the economy," said Ms Luey.

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