R&D the loser as Kiwi firms feel more upbeat

26 per cent of businesses intend to take on more staff over the next year. Photo / Thinkstock

Fewer firms are planning to put money into research and development than a year ago despite a "cautious" resurgence in business confidence, says a new survey.

The latest Grant Thornton International Business Report, released this week, suggests many economies around the world will continue to face uncertainty and tough times this year.

But the New Zealand leg of the report, which interviewed 200 local businesses in December, found confidence had edged up by 12.5 per cent over the last quarter and more than a third of firms were upbeat about the country's economic prospects.

Businesses across the Tasman do not share this level of optimism and experienced a decline in confidence for the fourth quarter in a row, with 24 per cent of those surveyed positive about the year ahead.

The mood is more dire in the United States, where only 1 per cent of the survey respondents were buoyant about 2012.

Seventy-nine per cent of local employers surveyed said they planned to give workers a pay increase over the next year and 26 per cent expect to take on more staff. Of those hiking wages and salaries, 62 per cent said the increase would be in line with inflation.

But while more New Zealand businesses are feeling optimistic, the number planning to invest in research and development has declined by 4 per cent from the last quarter of 2010.

Grant Thornton partner Peter Sherwin said R&D spending traditionally took a back seat in tough times but that the survey results offered warning signs for the local economy.

"When businesses identify that they are going to spend less on things which are going to give a medium-term and long-term benefit, they're actually looking to maximise profit today at the expense of tomorrow ... it's going to put them behind their competitors or potentially reduce their marketability offshore where other countries continue to spend on research and development," Sherwin said.

"If we want to take New Zealand into a fully developed economy moving up the OECD scale, we will have to do more than export primary produce. I think this anticipated decline in R&D investment is a real danger signal. It's a call to action and it needs leadership from the Government to help business be more open to R&D."

The Ministry of Science and Innovation's Brett O'Riley said firms did not necessarily need to spend a lot of money in R&D to start to see results.

"New Zealand has such a strong capability in our universities and Crown Research Institutes I would suggest many businesses could get quite dramatic improvements in their performance by partnering with those organisations without it requiring significant investments. Our [ministry] business R&D investment programmes are scaled right from entry-level to mature businesses so there are opportunities for projects of all scales."

The ministry hoped to lead a "step-change" in research spending over 2012, working alongside the likes of regional economic organisations, business incubators, universities and New Zealand Trade and Enterprise.

LOOKING AHEAD

Grant Thornton International Business Report:

36 per cent

of local firms feel optimistic about New Zealand's economic prospects in 2012, compared to 24 per cent in Australia.

79 per cent

of employers plan to increase wages.

26 per cent

of firms intend to take on more staff over the next year.