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NZ Manufacturer November 2013

BUSINESS NEWS NZ business confidence soars N

Great minds discuss ideas; Average minds discuss events; Small minds discuss people. – Eleanor Roosevelt

ew Zealand has soared to sixth in the world for business optimism, its highest ranking since 2010 with the mature economies of the United Kingdom and the United States starting to drive global business growth, according to new research from Grant Thornton’s International Business Report (IBR). The gap between New Zealand and Australian business confidence remains wide with only a net 23% (26th in the survey) of Australian businesses feeling upbeat compared with 64% of New Zealand businesses. Of the 45 countries surveyed New Zealand ranks sixth in confidence at 64%, behind Philippines 96%, United Arab Emirates 84%, Denmark 76%, United Kingdom 76% and Peru 74%. Simon Carey, partner at Grant Thornton New Zealand, said that New Zealand is now reaping the benefits of some sensible government management of the economy as a result of the Global Financial Crisis. “The economy has remained pretty steady over the last couple of years but we are now building a solid foundation for fruitful economic gains in the years ahead, with some economists picking a 4% growth for the New Zealand economy next

year,” he said. The ‘U-turn’ in sentiment by the United Kingdom and the United States suggests a shift in the global dynamic, with business growth opportunities set to increase in mature economies while emerging nations adjust to the prospect of slower growth than in recent years. However, Carey warns that further partisanship in the United States over the budget and debt ceiling could yet derail the global economy over the next few months. The IBR reveals United Kingdom business optimism has shot up from net 34% in Q2 this year to 76% in Q3. That is the highest figure ever recorded for the United Kingdom in 22 years of IBR research, and makes its business community the third most optimistic in the 45-economy survey. Business optimism in the

New Zealand is now reaping the benefits of some sensible government management of the economy

Simon Cadey

United States remains high too, at 52% in Q3 although marginally down from 55% in Q2. By comparison, businesses in emerging economies are markedly less confident. Brazilian optimism fell from 43% to 31% in the last quarter, a record low, while across Latin America as a whole optimism

Times still challenging for SMEs S trong housing markets in Auckland and Canterbury, along with the Christchurch rebuild, are masking the tough times that some businesses are facing around the rest of New Zealand. Eugene Sparrow, partner at chartered accountants and business advisers Grant Thornton New Zealand, said the economic environment remains “challenging” for many SMEs. His comments follow a report released by Statistics New Zealand that shows the number of businesses operating in New Zealand has fallen by about 8,300 since 2009, but the pace of firms falling by the wayside has slowed in the past year. The figures show that New Zealand had 472,600 businesses

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in February 2013, down 0.2 per cent from 2012. The number of businesses has declined for the fourth year, although total staff numbers increased in the past year. “We hear a lot about positives – and they’re certainly evident – but there are also real challenges. Our clients tell us that people are still very cautious about discretionary spending, especially in the likes of restaurants and bars,” he said. “Yes, things are better than they were in the recession, but it’s not booming yet.” Sparrow said hurdles for SMEs included strong competition, pressure on pricing and tighter lending criteria. “Bigger businesses have more equity which can act as a buffer in uncertain times. We’re finding that

Eugene Sparrow

they’re starting to pick off some of the smaller businesses that just can’t compete. “The small guys only have so many reserves. They can only nibble away at their capital for a while, waiting for the anticipated substantial recovery – but it’s not here yet.”

fell from 48% to 38% - its lowest since 2009. Elsewhere, Indian optimism (57%) fell to its lowest since 2003; Russia slid from 28% to 19%; Turkey (6%) dropped to its lowest since the financial crisis; and South Africa hit an all-time low of 18%. Despite a record low of 4% in Q2 China seems to be one step ahead of the other major emerging nations with business optimism improving to 31% in Q3. Carey said that the results highlight a subtle but significant shift in global economic growth patterns, with some rebalancing towards developed markets like the United Kingdom and the United States. “Together these two economies account for a quarter of global output so any recovery should have positive repercussions around the world. “China’s growth in optimism is also good news for New Zealand and Australia. While the United Kingdom and the United States remain very important for Kiwi businesses China is the ‘whale in the goldfish bowl’ and any lift in positivity for that country will have positive flow-on effects for New Zealand,” he said. The report warned businesses should not write off emerging economies in their search for growth, but the results highlight the reversal of fortunes in developed countries. The BRICs and other frontier markets need to tackle issues such as rising inflation and substandard infrastructure if they are to maintain the rapid growth we’ve seen in recent years and avoid the so-called ‘middle income trap’.

Nzm nov 2013  
Nzm nov 2013