Earthquakes affected two-thirds New Zealand businesses

Press release

28 June 2011

Earthquakes affected two-thirds New Zealand businesses

The September and February earthquakes affected nearly two-thirds of New Zealand businesses, according to the 2011 Grant Thornton International Business Report.

The survey, which was undertaken post the 4 September 2010 and 22 February 2011 earthquakes, indicated that 18% of businesses had suffered long-term effects, 26% suffered a medium term impact and 20% had suffered a short-term hit.

Tim Keenan, partner in the Christchurch office of Grant Thornton New Zealand, said one of the main over-riding problems facing business in the city post the spate of recent earthquakes is the shrinking talent pool for staff and senior management.

“With it being unlikely that people, outside of the construction sector, will move to Christchurch in the medium term, the demand impact for talent and skills is likely to have an inflationary effect on wages and salaries. A critical focus of employers in the region is the retention strategies they are executing in their businesses as this demand for talent rises.”

“While the impact has hit Christchurch the hardest, businesses across New Zealand have also been affected. The report identifies a decrease in demand as the most significant factor, impacting on 48% of those affected while the destruction of transport routes and other infrastucture affected 26% of the companies, 24% incurred a reduction in staff and management morale while 20% of staff and management suffered destruction of their homes. The destruction of business premises affected 18% of businesses.

“What the earthquakes have done is make businesses focus intently on their own disaster recovery plans and future contingencies,” he said.

Keenan said that initially many businesses in Canterbury were upbeat about the short-to-medium term impact of the earthquakes on their business.

“However, for those businesses who are dependent on local demand, the on-going uncertainty caused by the aftershocks and the interim potential for Christchurch’s population to decrease, means that the health of the business has to be monitored constantly.

“Successful businesses are already reacting to the new environment and showing the necessary agility, making quick decisions and responding to a changing environment. Potentially those businesses who are focused on international markets will be more confident provided they can reassure their international customers around continuity of the supply chain.

The survey also showed that the Japanese tsunami and subsequent earthquake had an impact on New Zealand business with 28% saying that they were less optimistic following the disasters with 4% being significantly less optimistic.

“On the balance side, 24% were more optimistic,” he said.

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