5 Oct 2021

Lack of skilled staff holding back businesses

12:45 pm on 5 October 2021

Business confidence has fallen in the face of the resurgence of Covid-19, with firms struggling to find workers.

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A net 8 percent of respondents thought business conditions would deteriorate in the coming year, though the number reporting a better trading performance in the past quarter rose. Photo: nito500/123RF

The Institute of Economic Research's (NZIER) latest business survey shows a net 8 percent of respondents think conditions will deteriorate in the coming year compared with 9 percent optimism in the previous survey.

However, the number reporting a better trading performance in the past quarter rose to 29 percent from 27 percent.

NZIER principal economist Christina Leung said firms were mixed in their future views.

"Uncertainty over how the latest Covid-19 community outbreak will evolve has led to more caution amongst businesses towards investment in buildings, and plant and machinery.

"However, firms are feeling more positive about increasing headcount in the next quarter, particularly amongst retailers. This suggests that businesses are planning for a rebound in demand when alert level restrictions are relaxed," Leung said.

Difficulty in finding skilled staff hit a record 72 percent of respondents, and it now stands as the biggest constraint on growth, although finding unskilled staff was slightly less of a problem.

She said sentiment in the building industry had fallen sharply, from being the most optimistic sector in the last survey to being the most pessimistic in the latest.

"Capacity pressures remain very acute in the building sector, but building sector firms are finding it easier to pass on higher costs by raising prices. "

All other sectors surveyed were also more downbeat despite stronger demand in manufacturing and services. Retailers said demand was softer but also some of the inflation pressures were also easing.

"While supply-side constraints are likely to keep inflation elevated, overall, there should be a moderation in inflation pressures over the coming year," Leung said.