Christchurch firms invest more
More Christchurch business owners are investing in business development than those in other parts of the country, and that's a positive sign for the region's recovery, analysts say.
A study by the New Zealand Institute of Economic Research (NZIER) of four years of data from the MYOB Business Monitor shows that investing in business development, in other words securing market share, hiring talented staff and increasing use of information technology, had been the most successful way to survive a longer-than- expected economic downturn.
Business owners who reinvested in their business reported improved performance over the last four years, while businesses which tried to tough it out by cutting costs or delaying investments had struggled.
Those who invested have seen revenue growth over the previous 12 months increase from minus 9 per cent in early 2010 to more than 17 per cent in June 2012.
Those who did not invest reported slower sales growth from minus 6 per cent to 8 per cent.
NZIER's analysis showed the economic downturn had lasted far longer than most businesses expected.
In April 2010, 78 per cent of businesses said they expected the economy to be fully recovered by the end of last year, but by June this year nearly half (48 per cent) of businesses said they expected an economic recovery to be more than 18 months away.
NZIER principal economist Shamubeel Eaqub said the data showed this was not a typical downturn and a different business approach was needed.
"The recession lasted nearly twice as long as other recessions in the last 50 years, and the recovery since has been quite shallow.
"This has meant that businesses who have taken the approach of tightening their belts during tough times and trying to wait out the downturn have actually not performed as well as businesses who have focused on their core strengths and invested their way through the recession."
Christchurch business owners are more likely to put money back into their businesses than their counterparts in other parts of the country, as the region recovers from the earthquakes.
About 14 per cent of Christchurch businesses were planning to increase the number of staff in their business over the next 12 months, compared to 9 per cent for the rest of the country, MYOB data shows.
About 26 per cent were planning to pay more in wages, compared to 20 per cent elsewhere.
Christchurch businesses were more likely to invest in grabbing new customers (35 per cent) compared to 29 per cent for the rest of the country and more than half (53 per cent) of Canterbury businesses planned to spend more money on hanging on to existing customers over the next 12 months, the highest of any region in the country - well ahead of the 39 per cent national average.
MYOB general manager Julian Smith said Christchurch businesses' higher level of investment was a good sign for the region.
"Christchurch's businesses have shown a real resiliency and adaptability over the last few years as they have adjusted to very difficult and uncertain circumstances," he said.
"What these results show is that the region's businesses have chosen the right strategy, and are finding a way back to growth."
- © Fairfax NZ News
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