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Business Optimism on the Increase in Canterbury

Media Release
Embargoed Until 4pm Monday 10 September

Business Optimism on the Increase in Canterbury, But Challenges Still Ahead

A survey of a sub-set of Canterbury small businesses severely impacted by the earthquake shows optimism is on the increase and sales are trending up, but they are still facing some weighty issues. These businesses identified as being particularly adversely affected by the earthquake continue to face challenges with respect to cashflow, marketing, fatigue and rebuilding issues.

The Recover Canterbury survey questioned businesses which had received support from Recover Canterbury or the Canterbury Business Recovery Trust. These were businesses that were generally quite badly affected by the earthquake and met the criteria for Recover Canterbury support.

274 businesses responded to the survey, which included businesses from a range of industries, with the largest sector groups being retail (22%), and manufacturing (14%). The survey aimed to ascertain the current state of businesses who have received support in Canterbury and identify the key issues and challenges facing them and by inference, provide some insight into the needs of similar businesses in the immediate future.

Recover Canterbury Operations Manager Bridget Frame says there is a growing but fragile optimism among these businesses, with 74% of them feeling positive about the future. Trade is generally picking up, although many businesses are struggling to get back to pre-quake levels.

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The survey asked about the key problems or issues facing businesses, and not surprisingly cashflow topped the list, with more than 57% of businesses naming cashflow as one of the top three issues they are facing.

“Challenges with cashflow were related to other issues within the business, such as increased operating costs, sales volumes, debtor management, tax obligations and reducing margins. The businesses surveyed are also telling us that delays in insurance pay-outs and the capital spent on individual recovery efforts are also impacting cashflows.

“Cashflow is a complex issue and there is no magic bullet to fix it. What’s required is an in-depth look at the business, and identifying changes that can be made to its operations to get the cash flowing” says Ms Frame.

Some of the issues identified by businesses, however, have positive implications for the future, such as issues around managing sustainable growth and staff shortages.

The survey also confirmed a growing concern about the condition of the business building stock in the city, with 34% of businesses stating their building either needs to be demolished or still needs repairs that will cause major disruption to the business at some stage in the future.

“Businesses need to start planning for this period of disruption now so that when the time comes they know how they are going to trade their way through it. Issues around building location have been one of the main elements of recovery planning that we work on with businesses and our focus on this issue will continue.”

Ms Frame says the results of the survey will play a part in influencing the focus of Recover Canterbury until April 2013, when the organisation will finish operating.

“Having these statistics is of enormous value to our team as it helps us identify categories of businesses that may be facing the greatest challenges and therefore influences the proactive work we do in the business community. It also helps us to ensure that we have the services and resources in place to help businesses with some of the key issues they are facing,” says Ms Frame.

The businesses that participated in the survey that identified specific issues requiring further support have already been contacted by Recover Canterbury. As well as the on-going work responding to requests from businesses for assistance, Recover Canterbury is working with groups of businesses on a number of projects. This includes working with a number of suburban precincts. A new Recover Canterbury initiative brings together businesses facing similar challenges to provide business-to-business support and to provide access to expert advice in a group setting.

“This survey shows that business owners are feeling more positive about the future and that for many their business is heading in the right direction, but it also clearly shows that there are still some challenges ahead. The Recover Canterbury team is working closely with other business support organisations, such as the Canterbury Employers’ Chamber of Commerce and the Canterbury Development Corporation, to provide targeted support and advice to our business community. The common aim of these agencies is to help businesses to work through the challenges ahead and play an active role in the Christchurch of the future,” says Ms Frame.

Please find details of the survey results below.

About Recover Canterbury
Recover Canterbury was established after the Christchurch earthquakes to accelerate business recovery and prepare businesses for future growth. It is a collaboration between the Canterbury Employers’ Chamber of Commerce and Canterbury Development Corporation, along with various government agencies involved in business support.
Recover Canterbury offers a wide range of services and resources to help businesses recover and revive, including advice, training and mentoring, referrals to professional services, business resiliency training and stress management coaching, assistance with business issues such as raising capital and, for eligible businesses, access to financial assistance through the Canterbury Business Recovery Trust or the Red Cross Independent Advice for Small Business Grant.
Sample: 274 businesses that had been assessed by Recover Canterbury as having very good chances of recovering from the effects of the earthquakes.
Growing Optimism
• Businesses were asked to rate their optimism three months after the February earthquake and to rate their optimism today. 74% of businesses feel optimistic about their business today, compared with only 26.8% reporting feeling optimistic in mid-2011.
• 14.8% of businesses are still feeling pessimistic, compared with 58.5% in mid-2011.
• The level of business optimism increases with the business size – the bigger the business (in terms of employees), the more optimistic they are.
Positive growth in trade sales
79.4% of businesses reported a swing towards improved sales.
• 50.9% of businesses reported that trade is either the same or improved, when compared to before the February 2011 earthquake. This is compared to just 8.9% in mid-2011.
• 38.7% of businesses are still reporting that trade is down, compared to before the February 2011 earthquake. Looking into the individual responses however shows that while trade is down compared to pre-earthquake levels it is up compared to mid-2011 eg: the business may have moved from ‘Much less trade’ in mid-2011 to ‘Less trade’ today.
Key issues currently facing business
• Businesses were asked to list up to three key issues they are currently facing. Key results are: Cashflow (57.5%), Loss of Markets/Sales (40.7%), Mental Tiredness (38.1%), Building/Location (29.9%), Insurance/Legal (26.1%), Managing Sustainable Growth (21.3%), Marketing Strategies (20.9%), Finance/Funding (20.1%)
• Cashflow was clearly the key issue currently facing businesses. Businesses that listed this as an issue were asked to provide the primary and secondary reasons for the cashflow issues. The overwhelming driver for cashflow issues was reduced sales volumes in 62.9% of instances. Increased operating costs accounted for 25.3% of cashflow issues, with customers being slow to pay (22.8%) and capital spend on recovery (21.6%). Some 13.7% of respondent businesses state that insurance payments not received is causing cashflow issues for them.
Building Condition
• 55.6% of businesses stated that their building is either OK or only requires minor repairs that will not disrupt the business.
• 6.4% of businesses stated that their current building needs to be demolished.
• 9.4% of businesses stated that their current building requires major repairs requiring relocation.
• 18.4% of businesses stated that their current building required minor repairs that will disrupt the business.
• 10.3% of businesses are uncertain about their building’s future, either because the extent of the damage is still under investigation or due to the business being impacted by the Christchurch Central Recovery Plan.
Building Location
• 63.1% of businesses state that their current location is either more favourable than their location prior to the February 2011 earthquake, or that the favourability of their location hasn’t changed.
• 32% of businesses state that their current location is poor due to restricted street access or less foot traffic than before the February 2011 earthquake.
• 4.9% of businesses state that they have no current access to their building.

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