Light at end of long tunnel for SMEs

New Zealand's small and medium businesses can finally see the upside as a time of sustained economic growth emerges, according to the latest MYOB Business Monitor.

New Zealand businesses have been resilient throughout the recovery from recession – investing in their operations despite sluggish pace local growth. Our latest survey highlights a positive change: a significant proportion of businesses are forecasting a solid first quarter, extending to growth across the whole year. 

Over the last year, almost a third of small and medium enterprises reported a revenue increase, while returns remained stable for 38% of them. Over 2013, the business community is looking to extend these gains, with 41% of business owners and managers expecting an increase in revenue in 2013.

As a result, there is more optimism about the road to recovery. Twenty four percent of business owners expected improvements in the economy within 12 months — up on 18% in the June 2012 Monitor.

What’s also interesting is that Christchurch now leads the recovery. It reported the most economic optimism, the best revenue gains in the past year and the highest revenue growth expectations.

The difference in the Canterbury economy from last year is marked, with 45% of local SMEs seeing a rise in revenue in the last 12 months – up on 28% in the last Monitor. Fifty seven percent of the region’s SMEs expected to see revenues rise over the next year and 35% reported a larger than usual workload in their 3-month pipeline.

In comparison to Christchurch, revenue improvements in Wellington and Auckland have not been as strong – both cities were off the pace they set last year. However, around a third of businesses in both centres reported revenue growth, with 23% in each city seeing revenue fall. 

Auckland businesses, though, are much more bullish about their performance in 2013. Forty five percent expected revenue to improve in the next year, compared to 31% in Wellington.

Some of the key sectors that tend to lead recovery are also showing encouraging signs of sustained growth.

Over the last year, 53% of the finance and insurance sector reported revenue growth, as did 36% of the business, professional and property sector. These sectors expect an even stronger performance in the next 12 months, with 59% of the finance and insurance sector and 46% of the business, professional and property sector projecting growth.

In contrast, the retail and hospitality sector; manufacturing and wholesale; and agriculture, forestry and fisheries sector were more likely to have seen revenue decline than increase over the past 12 months.

However, they are optimistic about a stronger 2013, with the majority of businesses in these three sectors expecting a revenue increase or stable revenue over the next year. 

These results are very encouraging and suggest we may finally have turned the corner in the recovery.

It’s particularly good to see that after the hardships of the last two years Canterbury businesses are being buoyed by the rebuild. That Auckland, the country’s engine room, is beginning to fire is also good news for the whole economy. This may be a year to remember for all the right reasons.

Scott Gardiner is MYOB's New Zealand sales manager for the business division.