BDO Business Wellbeing Index (April 2024 Report)

Reality bites for New Zealand business leaders as continued economic pressures contribute to record low business performance sentiment – BDO Report

The positive sentiment witnessed immediately after the 2023 General Election has subsided for New Zealand’s business leaders, who are now feeling more negative than ever regarding their business performance and finances.

The latest biannual BDO Business Wellbeing Index - the largest survey of its kind (including responses from over 650 business leaders) since October’s General Election - shows that just 53% of business leaders have felt positive about their business performance in the past two weeks. This is the lowest level of business performance sentiment seen since the first biannual survey in May 2022, and is significantly down from the 61% score recorded in the October 2023 survey (during the two weeks after the General Election).

This sharp decline in positive sentiment is reflected in how leaders are feeling about their business finances, with just 41% feeling positive about their finances in the past two weeks. Again, this is the lowest score for this measure across five survey waves, revealing the challenges New Zealand’s business leaders are facing under current market conditions.

The Index’s findings suggest that while there was a brief period of optimism following the election, with the Government campaigning on business-friendly policies, the underlying financial challenges have remained.

“This is a case of reality bites. When we undertook our last survey in the two weeks immediately following the election, business performance sentiment and business leader wellbeing were uplifted. This likely reflected a sense of hope and excitement among business leaders about the economic changes that a new government can bring – however, there is now potentially a realisation that change will not happen overnight.” - Kimberley Symon, BDO Advisory Partner

Economic concerns, cash flow to the fore among lowest scoring business performance attributes

The impact of New Zealand’s economic challenges is being felt strongly by leaders across the country, with business’ cash flow and financial performance struggling to keep pace with wider market conditions.

The April report for the BDO Business Performance Index shows just 27% of business leaders have felt positive about economic factors all or most of the time in the two weeks prior to the survey. This is the lowest-scoring business performance attribute, followed by cash flow (36% of business leaders feeling positive), political factors (40% feeling positive), financial performance (41% feeling positive) and workload (also 41% feeling positive).

“The effect of cost increases, inflation, and interest rate rises have a serious impact on SMEs across the country, so it’s no surprise to see economic pressures topping the list of concerns for businesses in New Zealand.” - Martin Veitch, BDO Head of Advisory.

Agribusiness bucks the sector trend

As well as commentary on the New Zealand business sector as a whole, the BDO Business Wellbeing Index report features sector-specific insights across agribusiness, construction, Māori business, not-for-profit, tourism and retail. While all sectors seem to be struggling with economic pressures and financial concerns, agribusiness leaders are feeling more positive about their current business performance than they were in October 2023, perhaps led by improving dairy prices.

Meanwhile, both retail and tourism business leaders are feeling considerably less positive about their business performance than they did in October, seeing first-hand the impacts of weakening consumer demand and increased costs.

Wellbeing declines, driven by financial and economic concerns, but remains higher than pre-election

The March 2024 WHO-5 Wellbeing Index score of 68 (the World’s Health Organisation’s internationally-recognised wellbeing methodology, measured over the past two weeks), is down 6 points from October 2023’s record high, yet remains higher than the two surveys prior to the election.

In the six months following the October election, the percentage of leaders saying that business financials have been driving negative wellbeing has ballooned from 49% to 63%. Business financials remain the leading driver of negative wellbeing, followed by economic pressures – also significantly increasing from 31% to 47% in the six months following the election.

The report suggests that leaders are taking active steps to protect their mental health, perhaps in response to the increasingly difficult business environment and a growing awareness of mental health in the New Zealand business community. Flexible work practices, managing boundaries, and delegating work are all ways business leaders say they remain mentally healthy.

Future expectations more positive

As shown in previous reports, business leaders are typically more optimistic about their future business performance than their current outlook. While just 53% of respondents felt positive about their current overall business performance in the March 2024 survey, this positive sentiment jumps to 60% when looking ahead six months. This potentially signals anticipation of further economic policy announcements from the new Government, including during the upcoming May Budget.

Looking ahead six months, the top two expected drivers of negative wellbeing are the same as at present; business financials and economic factors. However, most business leaders are expecting these to impact them less in the future.

Businesses grapple with new technologies and artificial intelligence

The report shows that only 46% of leaders have felt positive about leveraging and adapting to new technologies, including AI, in the past two weeks. This is one of the lowest-scoring business performance attributes and suggests leaders may still be getting their heads around how to effectively leverage AI in their organisations.

However, looking ahead, 55% expect to feel positive about new technologies and AI in six months’ time, which may mean there are plans in place to get a firmer grip on this significant technological change soon.

“If your business has capacity in the coming months, use it wisely. Consider taking the opportunity to look internally at your systems, processes, and technology including AI. Use quieter periods to improve your business, and when your business is busy again, you’ll be thankful you took the opportunity to make upgrades and improvements.” - Martin Veitch, BDO Head of Advisory

More about the report

BDO’s fifth edition of the biannual BDO Business Wellbeing Index is based on survey responses from a nationally representative sample of over 650 local business leaders in March 2024. The survey measures both business performance sentiment and mental wellbeing among respondents, including their current and future outlook (in six months’ time) – and explores the key drivers for these across a comprehensive list of business attributes. The report features insights and practical tips for business leaders, as well as video interviews with BDO experts and actual business leaders.

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