Confidence among small and medium-sized firms tumbles to three-year low

Thirty-eight per cent of construction and trades business operators predict the economy will decline. Picture / Getty Images

The economy is facing a crisis of confidence among New Zealand's small-to-medium sized enterprises, according to the latest MYOB Business Monitor survey.

Small-to-medium sized enterprises (SME) expectations for the economy fell from an overall net positive 21 per cent in the March 2017 Monitor, to a net negative 14 per cent in the latest survey - its lowest level in three years.

Businesses in the primary sector were the most pessimistic about the coming year, with more than half of the operators in the industry (52 per cent) predicting the economy would decline.

Manufacturing and wholesale business operators were not a lot more optimistic, with 41 per cent expecting a decline. The number was lower for construction and trades business operators (38 per cent).

SME operators make up more than 500,000 businesses in New Zealand.

MYOB general manager Carolyn Luey said there was a wide range of considerations contributing to the fall in confidence amongst SME operators.

"The level of uncertainty around the policies and direction of the new Government has been well canvassed in recent surveys."

"But other concerns, such as a looming international trade war, global instability and, closer to home, the range of new taxes being mooted by the tax working group – all of which were covered during the survey period – are likely to be factoring into how well business operators believe the New Zealand economy will perform."

"Overall though, we hope business operators can take heart from the strength of their own performance, and that of their peers, and recognise that there are a great many positives to take forward into 2018."

Regionally, Christchurch-based business operators were the most pessimistic about economic conditions this year with 48 per cent expecting to see the economy decline.

Forty three per cent of Auckland-based operators expected a decline in the economy - though this number dropped to 38 per cent for those outside the main centres.

Wellington business operators were more balanced, with 36 per cent expecting conditions to decline and 35 per cent predicting an improvement in the economy.

Despite the overall lack of confidence in the economy, most business operators forecast their revenue would improve (38 per cent) or remain (41 per cent) at current levels over the next 12 months.

Thirty six per cent of businesses reported an improvement in revenue in the last 12 months, the same level as 2017, while 20 per cent reported a fall in revenue.

Luey said there were other strong signals that business would improve over the coming year.

"Most of the growth signals we look for, such as increased work in the pipeline, new jobs and wage growth are present in this survey – they are just not reflected in the overall sentiment."

Luey said that while businesses were right to express some caution, there was a risk that the growing levels of pessimism could affect the economy.

"The fundamentals of the SME economy at present are strong – businesses in general are doing very well, and most expect that performance to continue over the next 12 months," Luey said.

"While there are some areas to watch – such as the decline in manufacturing sector earnings and lower levels of revenue growth for the primary sector – the overall sector is in good shape."

More than 1,000 business operators around the country participated in the latest MYOB Business Monitor survey.