NZ at risk of 'economic desert'

New Zealand will degenerate into an "economic desert" unless the Government fully recognises the integral role that small and medium-sized companies play in boosting productivity and growth, business leaders say.

Though there is a general acceptance among SMEs - companies with fewer than 20 workers - that the Government has started to listen to the sector's needs, a far greater level of engagement is required if the economy is to evolve.

This was the key message at Auckland's SkyCity Convention Centre last week as SME business leaders debated long and hard with politicians at the inaugural Small Business Summit.

Business New Zealand chief executive Phil O'Reilly told delegates that a more sophisticated level of thinking was required of Government ministers instead of the sector being repeatedly ambushed by poorly thought-through policies such as KiwiSaver.

Mr O'Reilly said that since 1999, the Government had passed more than 2000 new laws and regulations with little cost-benefit analysis [for the SME sector]. Compliance costs had now reached $2400 per employee a year in SMEs.

"The New Zealand economy is significantly smaller than the Sydney economy - we have to expand and export. Boosting productivity is key to our success as a nation - that requires greater engagement with politicians."

Mr O'Reilly called for the Government to do more to help start up businesses, reduce compliance costs and address a worrying skills shortage. SMEs made up 97 per cent of New Zealand's 360,000 businesses, yet just 625 companies, predominantly bigger, well- established firms, generated 91 per cent of all exports.

Roger Wigglesworth. director of the Effective Markets arm of the Economic Development Ministry, highlighted the "backbone" contribution SMEs made to the economy. He compared the investment, in time and resources, that other developed countries had made in their respective SME sectors, such as in Britain, where the British Government had set up more than 3000 support schemes.

"This [Britain] is a government responding to their [SME] needs," he said. "SMEs are key contributors to economic growth, therefore they cannot be ignored."

Claire Massey, Massey University's director of research into SMEs, said New Zealand was littered with contradictory perceptions of the sector's importance. On one hand, SMEs were the beating heart of the economy. On the other, the sector was dragging back the economy.

"If we don't get our act together collectively we will end with an economic desert," she said. "... We can't survive without the small-business owner: the shoe mender, the Indian restaurant, the clothes shop."

Clayton Cosgrove, Minister for Small Business, tried to deflect criticism. By providing the "tools and support", the Government had slashed compliance costs by a third since 2005, he said. Tens of millions of dollars had also been pledged for a variety of projects, such as improving broadband, Companies Office text message alerts and advice on overdue company returns.

"Ultimately, it must be our businesses that have the confidence and capability to compete in global markets, make good business investments, and reap the rewards.

"It is New Zealand businesses that are taking New Zealand forward and the Government needs to support that."