27 January, 2016

SMEs confident of growth but not new jobs

Half of New Zealand small-medium businesses (SME) are confident of growing their business over the next six months but don’t see that translating into more jobs, according to the Westpac Business Growth Monitor.

The Westpac Business Growth Monitor measures the confidence that more than 500 SMEs (with less than $5million turnover) have in the economy, their plans to grow, intention to create jobs and need for funding. The results of the quarter to 31 December 2015 showed that 49% expect to grow revenue over the next six months (v32% that don’t) with the highest confidence in the Manufacturing, and Business Services sectors.

That confidence however does not mean more jobs will be created.

“Only 13% of those surveyed intend hiring more staff in the next six months and just 16% intend doing so over the next 12 months,” Steve Atkinson, Westpac Head of Specialists Business said. The Primary and Construction sectors are the most confident of hiring over the next year.

“The reluctance to take on staff may be related to concerns about how strong growth will be over the coming year. Over the next six months, 39% believe it will be unstable or in decline against 43% who think it will grow.”

“One conclusion could be that most are looking to grow but their view on the economy is a red flag against hiring more staff,” Atkinson said.

Underlining that possibility is that 64% of those intending to hire staff would be doing so to service or retain customers.

Notably, just under two thirds (61%) of those businesses intending to grow have a business plan to achieve their goal. Trade, transport and tourism, primary industries and manufacturing were the most prepared.

Auckland businesses are more confident in the economy than the rest of the country (53% vs 38 %) over the next six months. However, when it comes to having a plan for growth Auckland SMEs lag behind the rest of the country have one, 51%  vs 67%.

Of those businesses with plans for revenue growth, 19% plan to borrow and finance the growth, mainly to buy assets or new equipment.

Creating an exit or succession planning remains a weakness among SMEs.

Nearly two thirds of the businesses not planning for growth cited work/life balance or plans to retire as reasons.

 “This remains a lost revenue, profit and employment opportunity for the economy,” Atkinson said.

“With better succession planning and thinking about how to sell a business as a going concern, there’s a win situation for business owners and the

broader economy”. 

KEY FINDINGS



Revenue growth


- 49% expect revenue to increase over the next 6 months vs. 32% who expect no growth or a decline.

- Breakdown by industry for SMEs expecting growth: 46% Primary; 62% Manufacturing; 47% Trade, Transport and Tourism; 45% Construction; 52% Business Services.

- Of those businesses intending to grow and borrow, 47% plan to buy assets or new equipment. Just 16% are looking for working capital.

- 19% of those expecting revenue growth in next 6 months anticipate needing to borrow to finance this growth.

- Of the businesses planning to grow and borrow to finance the growth, 44% anticipate loans of $50,000 or more.

- 61% of those with plans for growth have a business plan to achieve that growth (51% Auckland and 67% the rest of New Zealand)

Economic confidence

- 43% anticipate growth in the economy over the next six months, vs 30% who see the economy as unstable.

- Auckland SMEs are more confident in the economy over the next six months than the rest of NZ, 53% vs 38%

Employment

- 13% of SMEs intend to increase staff in the next six months

- 16% intend to increase staff in the next 12 months (21 % Construction; 19% Primary; 18% Manufacturing; 15% Trade, Transport and Tourism; 14% Business Services)

- Of those businesses intending to increase staff, 64% need help with servicing customers.