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South Island businesses more optimistic than north

Media release

April 9, 2013

South Island businesses more optimistic than north; skill shortages a concern

When it comes to optimism about theeconomy, South Islanders are much more bullish than North Islanders with twice the number of Mainlanders being “very” optimistic compared with their northern neighbours.

The Grant Thornton International Business Report (IBR) shows that 16.8% of South Islanders are very optimistic about the economy in the next 12 months compared with 8.10% of the North Island.

Simon Carey, partner, Grant Thornton New Zealand Ltd, said that the gap narrows when talking about optimism overall with 65.2% of South Islanders being optimistic compared with 61.6% of North Islanders.

“These optimism figures are supported throughout the survey with South Island firms expecting to generate more revenue than North Island companies (68.4% to 66.7%), generate better selling prices (46.3% to 38.4%), employ more staff (44.2% to 34.3%), invest in plant and machinery (62.1% to 54.5%) and pay higher wages with 80% looking to increase salaries in line with inflation and above compared with 72.7% for the North Island. At the generous end, 22.1% of South Island firms will increase salaries at levels above inflation compared with 19.2% for the North Island.

“Optimism in the South Island has been trending ahead of the north for some time as evidenced by the research which revealed that 45.3% of South Island firms employed extra staff in 2012 compared with 29.3% for the north. These employment figures were further reinforced by the fact 25.3% of North Island firms decreased their staff in 2012 comparedwith 16.8% for the south.”

Over the last month or so the gap has narrowed with North Island sentiment being lifted by the bubbling Auckland housing market.

“South Island levels are tapering mainly because the high end growth that businesses were looking for is now occurring so the expectation levels that drive a business owner’s optimism are more muted.

“It’s not that business levels are dropping, quite the contrary, but once a goal has been achieved enthusiasm and optimism levels tend to level off,” he said.

Carey said that the Christchurch rebuild was the strongest factor in this optimism and that the spinoffs from the work being generated out of the city were spreading throughout the South Island.

“The wine industry is making a recovery led by Marlborough sauvignon blanc, as is the Central Otago property market shown by the increasing number of sales and while there is a drought, the impact is probably being felt more in the North Island than the South Island.”

The one cloud over the South Island economy is the acute concern about a shortage of skilled workers.

“In the South Island close to one in five businesses (18.9%) identify a lack of skilled workers as a significant impediment for the future compared with one in 20 (5.1%) for the North Island.

“And this shortage is not confined to the construction market, but across the board. The professional services sector is starting to struggle, as is the banking sector, while the transport sector needs more drivers.

“Many employers are mindful of this and trying to attract more staff by offering higher wages with 80% looking to increase salaries in line with inflation and above compared with 72.7% for the North Island.

“The South Island is almost getting to the stage where the pull factor is greater than the push factor. There are plenty of skilled jobs available, many right at the sharp end of new technology, especially in the construction and related areas, and lifestyle is an attraction.

“It is already starting to happen. For example, consulting engineering firm Aurecon has increased its workforce inChristchurch from 60 to 160 since the 2011 earthquakes, with the number of overseas-born staff increasing from 10 to 60 representing 27 countries.

“There is no doubt that the supply and demand curve is going to put upward pressure on wages over the next 12 months,” he said.


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