Christchurch businesses confidence "amazing" - survey

Christchurch businesses confidence "amazing" - survey

Christchurch leads the South Island in business confidence with an amazing 55% of businesses expecting to grow by more than 10% per annum over the next five years, compared with 26% for the rest of the South Island.

This is one of the key findings of a survey of South Island business leaders, conducted by business advisors Polson Higgs and McCulloch and Partners. The survey was completed in June and included 49 businesses in Christchurch and 47 others from around the South Island.

Michael Rondel, partner, Polson Higgs, said that even though many businesses are coming off a low base following the global economic crisis, the strength of the Christchurch optimism was impressive.

"When you look at the figures, there is strength across the board in the South Island. In the next two years 19% of Christchurch businesses expect to grow by between 1% and 5% per annum, 21% by between 6% and 10% and 57% greater than 10%. For the rest of the South Island, it is 36% by between 1% and 5% per annum, 30% by between 6% and 10% and 30% greater than 10%. "For Christchurch, the five ­year figures are practically unchanged, 17% expecting growth between 1% and 5% per annum, 25% by between 6% and 10% and 55% greater than 10%. For the rest of the South Island it is 26%, 40% and 26%," he said.

Rondel said that it was interesting to note that while businesses are optimistic about their own individual prospects, they remain cautious about the general business climate in the short and medium term.

"Over the last 12 months, businesses said that in the areas of competition, availability of skilled labour, and wage expectations, the market had tightened, and they do not expect this to change in the next 12 months.

"In fact, they added a fourth area of concern, the cost of finance with the expectation that the Reserve Bank is going to increase the Official Cash Rate followed by an interest rate hike.

"What this indicates, in light of the concerns noted, is that business growth and profitability is expected to be driven by controllable internal factors, such as productivity and innovation, which in turn will lift sales and profits," he said.

Other factors identified in the survey:

Investment intentions

Respondents expect to invest more in their businesses in the next 12 months than they did in the last 12 months. Investment intentions are stronger among Christchurch businesses than non-Christchurch businesses. This surge in investment intentions probably reflects a combination of the lack of investment in Christchurch businesses in the past 12 months and businesses gearing up to meet increased demand driven by the future rebuild of the city.

Remuneration

Businesses are evenly split between those expecting increases in the 1-2% range and those expecting increases in the 3- 5% range. There are no significant differences between businesses located in Christchurch and those located elsewhere. These expectation levels are somewhat higher that those reported in a similar survey in August 2010.

Impact of the Christchurch earthquake

The impact of the February 22 earthquake (and subsequent smaller earthquakes) on Christchurch businesses has been well documented in many publications and the results of this survey reinforce many of those findings.

While, as would be expected, Christchurch based firms reported being more negatively affected by the earthquake(s) than those based outside Christchurch, it is notable that, overall, non-Christchurch businesses had been significantly negatively affected in five business aspects:

· Collection of debts (perhaps because of cash flow difficulties of Christchurch based debtors)
· Transport and communication
· Access to reinsurance (reflecting concerns about knock-on effects to insurance availability)
· Ability to operate efficiently (especially due to disruption to supply chains and key suppliers)
· Ability to implement business plans

Christchurch businesses themselves reported the largest negative impact related to:
· Employee morale and engagement
· The availability of skilled employees
· The ability to operate efficiently
· Transport and communication
· The ability to access insurance proceeds
· The ability to implement business plans

Overall, Christchurch businesses remain optimistic that they will bounce back from the earthquake, which was considered to have had no net impact on future growth opportunities and demand for goods and services.

The survey was carried out on-line with 96 respondents from 314 companies approached. Companies with a turnover between $1 million and $5 million (36 per cent) made up the largest group of respondents, with those in the $5 million to $10 million bracket being 18% and in the $10 million to $50 million bracket being 19%.

© Scoop Media