Business prowess hampered by mounting financial pressures

There is angst about input prices or profitability from BusinessNZ members.

In its 2024 Business Sentiment survey, BusinessNZ found members’ top concerns revolved around financial matters: interest rates, inflation and input prices or profitability.

Next on the list are issues surrounding labour productivity and government spending.

Survey respondents said one of their top five concerns was the level and quality of government spending. BusinessNZ says this may indicate they see high government spending as being a cause of their other top worries: inflation and high interest rates.

Close to half (43%) of respondents listed interest rates among their concerns for the wider business community and more than a third (37%) say it affects their own organisation.

There is almost as much angst about input prices or profitability with two in five (41%) of respondents listing it as a concern for their own business and 36% seeing it as a brake on the wider business community.

Inflation may be easing, but it remains a worry for BusinessNZ members with a third (33%) saying it is a problem for the sector and 28% listing it as affecting their organisation’s business confidence.

Best achievements

These financial concerns showed up strongly when BusinessNZ asked respondents to describe their best achievements over the past year.

Eight of the 134 respondents replied with variations on the theme of managing to survive through a downturn.

For Rick Osborne, of Metals NZ, the achievement was “minimising losses”, while for Ian McPherson, of Enterprise Recruitment, it was “retention of all staff in tough times”.

One leader says staying in business was their achievement and the idea of holding on until 2025 is real. He was not alone.

Despite the headwinds, 20 of the respondents said their achievement was to grow all or part of their businesses, many mentioning the difficulties and overcoming them.

Mark Malpass, CEO of Steel & Tube Holdings, says strong customer relationships allowed his business to grow in value and services to customers during the year.

At Ventia, executive general manager Damian Pedreschi says the company managed to meet budget and grow the team.

BraveTrace CEO Shaun Goldsbury says the company “achieved significant sales growth from previous year”. For Guy Stewart, managing director of Skope Industries: “Last year was our best year, ever.”

At Sealord, CEO Doug Paulin says his achievement for the year was to execute a major acquisition at a time when profitability was low and interest was high.

“Securing a large international export contract” was the highlight of the year for Kirsty Grant, who is CEO and co-owner of Lane Street Studios.

Looking forward, Zespri’s Rachel Lynch says the kiwifruit exporter will prioritise: “Growing supply to meet growing market demand” in the coming year.

A majority of respondents say they intend to invest either the same or less in capital expenditure over the coming year when compared with the last year. Only 22% say they expect to increase their capital expenditure.

It’s a different story with information technology, with 40% saying they expect to increase their spending and only 24% saying they will authorise less IT spending over the coming year. Mitre 10 CEO Andrea Scown says her business’ top priority for the next year is: “Finishing our digital transformation and landing a new 10-year strategy.”

For one executive, next year’s priority involves dealing with the “increasing digitisation of the New Zealand economy”.

For Andrew Hunt, managing director at the Kinetics Group, last year’s highlight was developing new cyber services to meet client requirements. One business leader plans to “proactively leverage AI safely to improve productivity” while another is looking to “automation and AI to position for future investment in infrastructure”.

Corporate tax

Close to two-thirds (64%) of BusinessNZ’s respondents are concerned the headline corporate tax is either too high or not competitive enough to attract foreign investment. The current rate sits at 28%, the eighth highest of the 38 OECD countries. A quarter (25%) are not concerned, while 11% are unsure.

BusinessNZ followed this up by asking survey respondents if the Government should consider reducing the headline corporate tax rate to 25% by 2027. This would bring it into line with Australia. Almost three-quarters of those surveyed (74%) are in favour, 16% disagreed with the idea.

Although a replacement is being developed, the Resource Management Act continues to rankle the business sector. Respondents were asked to rate how well the existing RMA performs when it comes to enabling development on a scale of one to five, with one being “not well” and five representing “very well”. Only two people say the RMA works “very well”, while almost a third of respondents (31%) gave a score of “not well”. A further 31% gave a score of two. The average score came in at two out of five.

Council issues

There was a similar lukewarm result when respondents were asked how their local councils perform when it comes to enabling growth and development. Again the scale ranks from one to five with one being “not well” and five being “very well”. Once again the average score came in at two out of five. This time 40% of the sample opted for one out of five.

On a related local note, BusinessNZ members were asked how well the local roading infrastructure in their area met their needs.

Answers were given on a scale of one to five, ranging from inadequate to very good. Around a quarter of responses, 24% and 25% respectively, came in at one and two, with close to a third (30%) sitting in the middle of the range at three out of five.

The average came in at 2.4.

Business energy costs have been a huge news story in recent months with Winstone Pulp International blaming unsustainable power prices for the closure of two mills near Ohakune. The survey asked respondents to rate their energy prices on a scale ranging from one, “very unaffordable” to 5, “easily affordable”.

Answers averaged 2.5, with 11% saying “very unaffordable” and 38% giving a score of two.

One respondent listed “obtaining a long-term power purchase agreement” as their best business achievement for the year and says that “managing energy price risk” will be their priority in the coming year.

Finding and retaining skilled and qualified employees remains a challenge for BusinessNZ members.

When asked to rank the ease of finding people on a scale of one to five, with one being “very hard,” respondents gave an average score of 2.7.

Skills feature heavily in next year’s priorities for respondents. A number of respondents mentioned either finding or retaining staff as their achievement for the year.

One says: “Retaining all staff through a recession without restructuring.”

Enterprise Recruitment chief operating officer Ian McPherson lists “retention of all staff in tough times” as his business achievement.

Staffing issues also feature in respondents’ priorities for next year.

Adele Rose, chief executive of 3R Group, lists hers as: “Retain key employees by remaining competitive with employment packages beyond remuneration and negotiating short-term leases for office space that can expand and retract with business demands”.

Another leader says their priority will be “holding staff for an incoming pipeline of work expected in six months”.