Business Confidence Rising Despite Skills Shortage

18 October 2004
Media Release

Business Confidence Rising Despite Skills Shortage

A shortage of labour is limiting growth for a quarter of all businesses surveyed in the latest Economic Business Survey.

The quarterly survey of the Auckland region’s businesses shows that a “shortage of labour” was identified as the single factor most inhibiting growth by 25% of all respondents.

The Auckland Chamber of Commerce survey also shows the SME sector as being hardest hit by the skills shortage with 68% of all companies with 20 employees or less stating a labour shortage as the factor most limiting their ability to expand.

A shortage of labour was second only to a “shortage of demand”, which was identified as the single factor most inhibiting growth by 27% of all survey respondents.

“A shortage of demand is often identified as an obstacle in line with the limited size of the New Zealand market, but this is trending downwards while the more worrying trend is the steady rise in the number of businesses listing a shortage of skills as their main concern,” said Chief Executive Michael Barnett.

Over the past year the number of companies listing demand as their main obstacle to growth has declined from 32% in September 2003 to 27% now, while those listing a skills shortage has steadily increased from 14% of businesses to 25%.

Labour shortages were identified across every industry, with particular concerns echoed in the trade, science and engineering sectors.

“Staff shortages will lead New Zealand into an economic decline far quicker than overseas influences could ever do. To obtain capable staff you now have to pay a higher rate and this has to come out of profit, if the trend continues then a lot of businesses in New Zealand will no longer be viable,” said one respondent.

Also significant is the increase in the number of businesses identifying both skilled and unskilled labour as being harder to find.

In September 2003, 40% of respondents said skilled labour was harder to find than it had been three months earlier, but in the latest survey 53% of businesses said skilled labour was harder to find than it had been three months earlier.

With unemployment sitting around 4%, even hiring unskilled labour is presenting difficulties for employers. In September 2003 13% of respondents said unskilled labour was harder to find than it had been three months earlier, but in the latest survey 22% of businesses have said unskilled labour is harder to find now than it was three months ago.

A shortage of labour also ranked ahead of a shortage of finance, which was listed as the single factor most inhibiting growth by 18% of businesses, and ahead of a shortage of capacity or supplies.

Despite difficulties in finding staff, overall business confidence has improved on the last two quarters, with 16% of businesses expecting to see the general business situation in New Zealand improve during the next six months and 57% predicting the general business situation will remain stable.

The survey also asks respondents to gauge how their own business will perform over the next six months, which indicated greater business confidence with 44% of companies anticipating their own situation would improve and 43% predicting their situation would remain stable.

Chief Executive Michael Barnett also noted that survey results indicated business had been conditioned to expect interest rates to increase, with 88% of respondents expecting interest rates charged on loans to rise over the next twelve months.

ENDS

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