More than a third (35%) said they were having to work longer hours as a result of the recent challenges within New Zealand’s economy.
Adrienne Begbie, Prospa New Zealand managing director, said the figures were confronting but it wasn’t surprising there was a correlation between economic challenges and the wellbeing of business owners.
“What we’re seeing are the effects of inflation and the cost of living, and the impact this has on business owners’ overall wellbeing,” Begbie said.
“Inflation and cost of living have meant that many small businesses just aren’t seeing the amount of customers that they usually would. For SMEs, any dip in customer spending is a serious issue, directly impacting their cashflow.
“What’s more, these challenges come at a time when supply chain and labour costs are also on the rise due to inflation.”
The research also showed in response to recent economic challenges, SMEs are more inclined to increase prices (42%) and use personal funds to cover business expenses (19%).
Owners have also made significant personal sacrifices for their business. More than half have had to cut back on personal expenses (51%), 36% are struggling to save for personal goals, 36% have had to postpone or cancel travel plans, 34% are sacrificing hobbies or leisure activities, and 32% are spending less time with family and friends.
“Business owners should never be forced to choose between their wellbeing and personal life, and the success of their business,” Begbie said.
“Business owners should not hesitate to seek external support – see what government grants and rebates are available, check out industry insights on how other like-minded businesses are dealing with current economic conditions, and seek professional advice from a financial adviser.”
SMEs were feeling more confident about the future of their business over the next 10 years (49%), up from 45% in November 2023.
“It isn’t the first time our country has faced a recession, and it won’t be the last. What this tells us is that we always bounce back,” Begbie said.
Begbie said rate cuts will provide some relief by easing the cost of living, but the effects won’t be immediate.
“While lower rates will help reduce the burden of everyday expenses, Kiwis still don’t have the disposable income for nice-to-have purchases, especially with other costs, like energy, expected to rise. However, the Christmas period should offer a much-needed boost for businesses.
“With rates potentially easing just as consumers naturally start shopping for the holidays, this could be a very [welcome] season for small businesses.”
Winter spending woes
All the recent data is pointing to extremely weak consumer spending appetites, making for a slow and challenging environment for businesses right now.
The tough conditions have led to a number of business closures in the first half of 2024.
Figures released from payments network Worldline last week showed consumer spending with core retail merchants (excluding hospitality) reached $2.82 billion in July, down 2.6% compared to July 2023.
“Spending across the country was down on last year in June and continued to be down in July, although there was a small school holiday effect bump seen within the month,” said Worldline NZ’s chief sales officer Bruce Proffit.
“The third week of July – the second week of the school holidays – was the worst of the month for core retail merchants in the major regions.”
Things aren’t any easier in the hospitality industry, with spending in the major regions (Auckland/Northland, Wellington, and Canterbury) and the “rest of New Zealand” down in July by 5% and 10% respectively when compared with a year ago, according to Worldline.
Retail NZ chief executive Carolyn Young said the challenge for retailers is to survive until 2025.
“Cashflow is critical and some retailers have indicated they don’t think they will have the cash to buy forward stock, putting their businesses at risk,” Young said.
Retail NZ’s latest quarterly Retail Radar, a survey of its members, showed both confidence and sales were at even lower levels in the 12 months to June than earlier in the year.
Almost 43% of respondents said they were unsure whether they will survive the next 12 months, up from 32% in the previous quarter and higher than the 36% recorded in the second quarter of 2023.
Additionally, 71% of retailers reported that they did not meet sales targets for the quarter.
Inflation was the top issue (80%) in the June quarter, up from 62% in the first quarter of the year.
This week Stats New Zealand will release electronic card spending figures for July. In June, retail spending fell for the fifth consecutive month.
Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics including retail, small business, the workplace and macroeconomics.
