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Red Tape Rules Again in New Zealand

Media Release Embargoed till 00.01 am May 16

Red Tape Rules Again in New Zealand

After a brief period of being mostly concerned about the lack of skilled workers, New Zealand businesses have again returned to regulation and red tape being their chief bogey.

The latest findings of the Grant Thornton International Business Owners Survey (IBOS) show that companies in New Zealand rate red tape as the most significant constraint to business expansion (42%), ahead of their concerns about having sufficient skilled workers (38%). Bureaucracy was previously considered the key constraint, but the workforce worry pushed it into second place last year.

In both cases this year, the New Zealand result reflects the global trend.

But New Zealand is above the global average on the red tape rage scale, although not in the league of Poland, Russia, Greece, Germany and the Netherlands, where the concern level was at 50% or more.

Australia (37%) and Ireland (30%) were among those who fretted less about red tape, but the least concerned of all was Singapore, at the foot of the global worry league. In fact, only two Asian nations, Malaysia and the Philippines, rated above 30%.

The Grant Thornton survey was conducted among more than 7,000 owners of medium-sized businesses with between 10 and 50 employees from 30 countries.

Grant Thornton New Zealand chairman Warwick Jones said he was not surprised at the New Zealand results from the survey.

"While there has undoubtedly been some official focus on the issue of red tape, the fact remains that there is a clearly a belief that New Zealand business is still strongly wrapped up inside regulations, rules and bureaucracy," he said.

"The situation here is in stark contrast to a competitor state in the shape of Singapore, which many people perceive as authoritarian but which clearly has a more open view on making it easy to do business. It is also a concern that to our neighbour, Australia, red tape is very much second among concerns about constraints, well behind availability of skilled workers.

"This is not good news for New Zealand for two reasons: one is that it could further encourage New Zealand businesses to relocate operations to Australia, and the other is that it could mean Australia luring more skilled workers across from New Zealand to alleviate their chief block to expansion."

New Zealand and Australia do have one thing in common, however, according to the Grant Thornton survey. They both think the strongest trend this year will be higher turnover. In the case of New Zealand, the majority also see selling prices going up, although that is seen as a lesser trend in Australia. More Australian businesses see a trend to investment in plant and machinery than is the case in New Zealand.

More critically, more Australian respondents see profitability rising than among New Zealand businesses questioned.

Warwick Jones said that given the importance of profitability in relation to business investment and expansion, the disparity with Australia was another point of concern.

"Our survey shows that New Zealand businesses, more than Australian companies, feel that the pressure on profit margins has increased in the past year. They feel somewhat more pressure on margins from fuel than in Australia, where the stronger factor is pressure from customers to keep costs down, something that rates second to fuel costs in New Zealand.

"Employment-related costs are of equal concern to both Australia and New Zealand in terms of margin pressure."


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