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SME confidence on a downward spiral

Long-term business confidence among New Zealand SMEs is on a downward trend, reveals new research by Prospa.

The latest RFI New Zealand SME Banking Council survey shows that despite short-term business confidence is stable and is recorded at the highest since 2020, looking into the future, confidence is plummeting.

Short-term business confidence over the next 12 months is steady at 53 percent, but SMEs say the opposite when it comes to taking the long view.

Looking into the future, 45 percent of small businesses stated they are confident over the next 10 years. This number has dropped six percent when last asked in May 2023.

For SMEs, their main concerns of inflation and cost of living still loom over them even as they adapt to the changing economic environment. This has jumped up 10 percent since May 2023.

Two-thirds of businesses say supply chain costs (67 percent) and labour costs (63 percent) are increasing, adding to their decreasing confidence.

Demand and cashflow is still a concern for SMEs, with 25 percent saying this is their main concern, another 10 percent jump from May 2023.

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Other stressors include cash rate increases (53 percent) and decrease in turnover in the next 12 months (48 percent).

Labour shortages are however easing across the board as staffing concerns are down to 13 percent, a 21 percent decrease from the year before.

“These are indeed challenging times and businesses need to identify how they can reduce costs and maximise profits, as well as looking at what support may be available for them,” says Prospa New Zealand Managing Director, Adrienne Begbie.

Though the country ‘s businesses are seeing early signs of recovery from economic hurdles, SME owners are still trekking on cautiously, a sign of a downward trend in confidence.

The trend seen in the latest research shows that in some cases small businesses are scaling back their operations to reduce costs (24 percent), some are seeking professional advice (22 percent) and others are still negotiating with clients to receive payments faster (20 percent) to ensure cashflow is steady.

With this in mind, Begbie urges SMEs more than ever to start working on their longer-term resilience strategies.

“We’ve seen it time and again – businesses that adapt to changing circumstances are the ones that thrive.”

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