Waikato business survey reports mixed signals
A survey of 589 Waikato business owners and managers has found that while overall economic sentiment is pessimistic, the region’s businesses are more optimistic about Waikato and sector performance than they are about the New Zealand economy as a whole.
This optimism is demonstrated by businesses signalling they are actively recruiting new staff, despite an environment of skill shortages and overall sales sitting below 2019 levels. Businesses’ lack of planning for future scenarios, however, is of concern.
Carried out between 3 August and 4 September 2020, the Waikato Business Sentiment Survey is the first of its kind for the region. It was conducted by Te Waka in partnership with local authorities, chambers of commerce, regional tourism organisations, business associations and other economic development partners in the region.
Te Waka chair Hamish Bell says the survey showed Waikato’s net business confidence in the Waikato economy (-14%) is better than their overall confidence in the national economy (-31%). Respondents hold a less positive view than the -26% seen nationally through authoritative economic surveys, such as the ANZ Business Outlook, which has this week released preliminary September results.
“While we need to acknowledge the challenging economic environment, there is optimism in certain sectors, notably the professional services sector, including administration and support services and the agriculture sector.
“Those sectors have shown the fastest growth within the region since 2000, and it is understandable that they are more upbeat.”
The survey results revealed worrying trends related to business planning and preparedness. For businesses with 1-10 employees, 50% do not have business plans, 58% have no cashflow forecast and 78% have no business continuity plan.
“Despite this lack of planning, the survey results indicate Waikato businesses feel they have a handle on the current economic situation, even though many have been forced to apply for wage subsidies and have seen sales drop,” says Bell.
“The survey does raise questions about Waikato businesses’ preparedness. They need to start thinking ahead about future scenarios. It’s imperative they are ready to quickly respond to a rapidly changing environment and remain agile.
“Tackling this disruption presents opportunities as firms are forced to innovate, take risks with bold thinking and step out of their comfort zones. No business can afford to become complacent in the year ahead,” Bell said.
Waikato businesses are generally confident they have the skills and resources required to tackle the challenges ahead. Only 36% of businesses surveyed said they needed external advice or support to move forward.
“I’m not sure this is a good thing or if it shows complacency and a lack of appetite to really kick on,” says Economist Cameron Bagrie who reviewed survey results this week to offer his view on the findings.
Skills shortages come through as a clear concern for Waikato businesses, with 54% of survey respondents believing there is a skills shortage. This trend is particularly pronounced among businesses with 11 or more employees, with 74% of these identifying a skills shortage and the construction sector where 95% of respondents noted this as a challenge.
“While there were skills shortages before Covid-19, the pandemic has accentuated them, especially for sectors such as construction,” says Bagrie.
“There are some massive changes that need to take place in certain industries, particularly across the education and training sectors, to reset for the slow reversal of globalisation and the changed immigration outlook.
“Ultimately, what matters is firms’ belief in their own businesses, which is what they can directly control and influence.
“On average the Waikato businesses surveyed rate confidence in their own business at 7.1 out of 10, which is a good result. This indicates a general feeling that Waikato businesses are looking to rebuild, which is evident in the reported staff recruitment plans.”
Survey results show that over the next six months 28% of Waikato businesses expect to hire staff, with only 11% expecting to decrease staff numbers. This trend is more evident in businesses with more than 11 full-time staff, with 39% of these expecting to hire and 15% requiring less staff within the next six months.
Survey results also show, by and large, Waikato businesses expect their sales revenue in the second half of 2020 to be below 2019 levels, though by a far lesser margin than what was seen between March and May this year.
The Waikato Business Sentiment Survey will be conducted regularly. Hamish Bell says the findings will give the Waikato a stronger voice when advocating to Government.
“This data will be valuable to policymakers as well as Waikato businesses. It can be used to inform the delivery of business support across the districts, including how this support is communicated and distributed so it reaches those with the greatest need.
“This inaugural survey shows there is more work to be done. The Te Waka team will now use the survey insights to guide our economic development work with our regional partners, who are the enablers for business,” says Bell.