Small and medium firms not feeling recovery

MYOB (NZ) general manager Julian Smith

Small and medium businesses (SMEs) have lost some of their confidence in an economic recovery since November, as more than a third of firms in a new survey report falling revenues.

The latest MYOB Business Monitor of small and medium firms, published today, found 49 per cent of firms surveyed expected the economy to begin to improve during the next year, down from 55 per cent in the November monitor.

MYOB New Zealand general manager Julian Smith said business owners appeared to have adopted a more conservative view of the recovery, as more business owners faced falling revenues.

According to the April MYOB monitor, 35 per cent of businesses reported a revenue decrease over the past 12 months, compared to 26 per cent of businesses with increased revenue. Of the businesses reporting a decrease, 47 per cent had seen revenue fall by between 20 and 39 per cent.

A fall in profitability was reported by 35 per cent of businesses, while 28 per cent had improved profitability.

Among small businesses - with five to 19 employees - 41 per cent were more likely to have seen profitability improve, while the worst performing industry over the period was construction and trades, with 49 per cent of business owners reporting a fall in profits, compared with 32 per cent in November.

Christchurch was the best performing region, with 30 per cent of business owners reporting revenue gains, compared to 26 per cent in Auckland, 22 per cent in Wellington, and 25 per cent in the rest of New Zealand.

The 49 per cent of Auckland business owners surveyed who expected business revenue to increase over the coming year, was more than Christchurch at 46 per cent and Wellington at 43 per cent, and the same as the rest of New Zealand.

Along with the revenue expectations, 32 per cent of Auckland businesses report more work than usual coming up over the next three months, compared to 30 per cent in Christchurch, 27 per cent across the rest of New Zealand and 21 per cent in Wellington.

By industry sector, the agriculture, forestry and fisheries sector reported the greatest improvement in pipeline work since the November monitor, with 28 per cent showing more work or sales than usual, compared to just 12 per cent in the November survey.

Mr Smith said many concerns were re-emerging.

"For the first time in almost a year, fuel prices are again expected to put the most pressure on business owners in 2010," he said.

"Cash flow is still expected to be a problem - particularly for micro businesses - while aspects of the financial markets: the exchange rate, interest rates and access to business finance, have again come to the fore as key business pressures."

While the signs of a recovery, particularly in short term sales and longer term growth, were definitely there, many businesses were still working through the effects of the recession, Mr Smith said.

The monitor is a nationwide survey of more than 1000 small and medium businesses, carried out by Colmar Brunton.

- NZPA