Five year growth high for SMEs

 

The performance of local SMEs has steadily improved over the last 12 months, with local businesses across the country reporting the highest levels of revenue growth recorded in the last five years.

Thirty-nine per cent of SMEs saw revenue increase in the last 12 months according to the SeptemberMYOB Business Monitor survey of over 1,000 business owners and operators from around the country, conducted by Colmar Brunton. The proportion of SMEs reporting revenue growth has risen from 35% in March and 30% in September 2013. Fewer businesses also saw revenue fall: 19%, down from 21% in March.

MYOB CEO Tim Reed says it is heartening to see New Zealand’s SME sector in such good shape.

“What’s particularly positive is that growth is no longer confined to just the two largest centres, with the rebuild in Christchurch and the expansion of Auckland no more the only drivers of the economy,” says Reed.

“This latest MYOB Business Monitor paints a picture of a whole country enjoying solid levels of economic growth.”

 

Although Christchurch SMEs continue to report the highest growth levels, with over half (51%) of the SMEs in the city seeing revenue improve in the last 12 months, the Monitor has also highlighted strong revenues in the regions.

In the March report, a number of North Island areas, including Bay of Plenty (21%), Manawatu/Wanganui (24%) and Northland (27%), were well below the national revenue growth average of 35%. The latest Business Monitor shows the regions much closer to the national average of 39% revenue growth, with just Wellington experiencing reporting subdued revenue.

 

The past six months has also seen a significant turnaround in key sectors of the SME economy. The retail and hospitality sector, which in March 2014 reported revenue falls (33%) outweighing gains (30%), has experienced a major improvement. In the latest survey, 43% of retail and hospitality SME operators have seen revenue increase in the 12 months to August 2014, while just 23% report a fall.

The primary sector has also recorded an improved performance, with 41% of operators in the agriculture, forestry and fishing industry seeing a revenue rise in the past 12 months, up from 29% in March. The industry also has the lowest numbers reporting falling revenue over the period – just 13%.

The logistics sector has experienced the largest fall off in growth over the past 6 months, with 24% reporting an annual revenue increase, down from 36% in March. However, the industry is experiencing a high level of stability, with nearly half (49%) reporting steady revenue in the year to August 2014.

 

The main concern of SMEs over the next 12 months is the rising cost of fuel, with over a quarter expecting pain at the pump – including 52% of transport industry businesses and 36% in the primary industries.

 

1. Fuel prices – 26%

2. Interest rates – 21% 

3. Cashflow – 19% 

 

Looking ahead to 2015, SME operators are expecting similar levels of growth to those they experienced this year, with 38% forecasting revenue to increase in the next 12 months, and 43% expecting steady revenue levels. Just 11% expect to see revenue fall in the next year.

Several of the regional economies that reported strong growth this year, should see that trend continue, as SMEs forecast high revenue levels for 2015. Northland and Manawatu/Wanganui in particular – regions that have often struggled somewhat through the five years of the Business Monitor survey – are expected the strongest levels of growth in 2015.

 

The positive performance of SMEs will translate into jobs in 2015, with 10% of the operators surveyed planning to increase the number of full time staff they employ in the next year, and 13% planning to increase the number of part time positions. It will also support wage growth across New Zealand, with 20% of SME operators planning to increase wages and salaries in the coming 12 months.

“New Zealand’s SMEs have earned the rewards they are currently enjoying,” says Tim Reed. “Achieving this current level of growth has been hard fought, and hard won and we congratulate them on their success.”

“Over the coming months, many business operators will be looking to consolidate gains, and invest more in their people, their systems and their operation, so they can enjoy these benefits for some time to come – no matter what the global economy may do over the years ahead.”

“A key part of that will be their investment in technology to make their business more streamlined and efficient, and getting the expert advice they need to maximise the benefits of this period of sustained growth.”