Kiwi Business Not Expecting Rugby World Cup Boost

Media release: Tuesday 17 May 2011

Kiwi Business Not Expecting Rugby World Cup Boost

• Less than a quarter expect economic recovery in the next 12 months • More business report revenue falls than gains – though gap closing • Despite pessimism, almost a third of businesses have more work in next quarter

Kiwi business owners are not expecting much of an economic injection from the Rugby World Cup, as confidence in a near term recovery all but collapses, according to the latest MYOB Business Monitor.

The MYOB Business Monitor, released today, shows that less than a quarter (23%) of businesses expect the economy to recover in the next 12 months, and just 5% expect to see recovery in the next 6 months. This is in stark contrast to the same survey a year ago, in which almost half of Kiwi business owners (49%) expected to see a recovery by now.

In particular, confidence in the manufacturing and wholesale sector has slumped from 59% in the last MYOB Business Monitor report – released at the end of 2010 – to just 28% in the current survey. Despite stronger economic performance, the rural sector shows very low confidence, with just 15% expecting recovery inside a year.

The number of businesses reporting revenue decreases over the past year (32%) also outweighs those reporting revenue gains (28%). This is a slight improvement from the end of 2010, with businesses reporting revenue increases up slightly from the last Monitor survey (3% from 25%).

However, despite growing pessimism, pipeline work – a key measure of the Monitor – has improved, with a third (31%) of businesses reporting more work or sales in the next quarter – up from 26% at the end of 2010.

MYOB General Manager Julian Smith says the sentiment of businesses reflects just how long the nation’s business owners have struggled with the effects of the recession, and how fragile are any signs of recovery.

“Going into our latest round of research, we expected to see some more confidence arising from the Rugby World Cup and its forecast economic benefits.

“However, despite some more encouraging performance data, including a slight improvement in revenue and a definite rise in pipeline work, the slumping confidence reflects just how hard Kiwi business owners have been finding the challenging conditions over an extended period.

“Many business owners expected the recovery to be in full swing by now, and the current state of the economy is making it hard to retain any sense of optimism.”

Mr Smith says the effects of the Christchurch earthquake have also had a real impact on the way business owners feel about the chances of recovery, with around 50% of businesses outside of Canterbury expecting to take a hit from the natural disaster.

“In terms of their own performance, though, businesses expectations are slightly stronger – with 36% expecting revenue increases in the next 12 months, and just 13% expecting decreases,” says Julian Smith.

“Auckland businesses are the most bullish about their own futures, with 39% expecting to see revenue increase in the next 12 months, while employers in mid-sized businesses are also more confident, with 52% of small (5 – 19 employees) and medium (20 – 199 employees) -sized businesses expecting revenue increases.”

Rising fuel prices, though, could have an impact on those revenue expectations. According to the Monitor, 42% of all businesses expect fuel prices to put considerable pressure on their business over the next 12 months. Transport and warehousing sector businesses (74%) and agriculture, forestry and fishing businesses (59%) are by far the most concerned about the rising cost of fuel.

Other pressures businesses face over the next 12 months are cash flow, seen as putting a lot or extreme pressure on their business over the next 12 months by 28% of businesses in the current Monitor, price margins and profitability (27%) and competitive activity (24%).

Julian Smith says – perhaps because business owners have been doing it tough for a long time – more are seeking help, with 87% of all business owners surveyed seeking expert advice on how to run their business more effectively.

“Its very encouraging, with businesses facing a wide range of pressures, that more Kiwi business owners are getting help from their accountant (64%), business associates (32%), their bank managers or advisers (26%) or business mentors (17%),” says Julian Smith.

However, Mr Smith says the greatest assistance business owners could get would be from the Government focusing on making it easier to do business in New Zealand.

“According to the MYOB Business Monitor, three quarters of all Kiwi business owners would vote for any political party that is committed to simplifying provisional tax rules and processes,” says Julian Smith.

“So if we could see one thing in this election year that would give businesses a welcome shot in the arm, it’s not the Rugby World Cup, it would be a commitment on the part of the Government to make it more simple and effective to do business in New Zealand.”

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