Dairy prices affecting over one fifth of SMEs
Tuesday, 15 March 2016
More than one-in-five small and medium enterprises across New Zealand are feeling the effects of falling dairy prices, according to MYOB.
A snapshot result from the latest Business Monitor research commissioned by MYOB and undertaken by Colmar Brunton, found that 21 percent of the more than 1,000 SMEs surveyed stated their business’ revenues were negatively affected by the dairy price. Even more concerning is the 25 percent of SMEs that said general consumer confidence has been directly hit.
Across the country, it means that approximately 100,000 businesses employing upwards of one million New Zealanders are facing reducing revenue because of the dairy downturn. MYOB General Manager James Scollay says that the results show a significant impact on the New Zealand economy.
“We are producing these results in advance of the full MYOB Business Monitor economic report as we felt it was important to highlight just how widespread the effects of farm-gate returns really are,” he says.
“New Zealand is extremely reliant on the agricultural economy. It stands to reason that the rural sector would have taken a hit, but what we are seeing is that the effects of the dairy downturn are filtering through to the cities and other industries, slowing consumer spending and beginning to hit the bottom line of many SMEs.”
Effects not confined to rural regions
Although Wellington and Auckland appear insulated from the effects on revenue, the garden city has seen an impact and consumer confidence is waning across the country.
Hit hardest of all the main centres was Christchurch. When asked, “To what extent has the dairy price affected your business in terms of revenue?”, a quarter of all businesses in the city reported a negative impact on their revenue and 26 percent stated consumer confidence was down as a direct result of the dairy price.
The Capital was the least of the major cities impacted, with only ten percent of SMEs stating their revenue returns were affected by the dairy price, and nine percent seeing a reduction in consumer confidence. In Auckland, although revenue returns have not been affected too strongly (14 percent), 21 percent of businesses in New Zealand’s largest city said they were seeing a negative effect on consumer confidence.
Outside of the cities, 39 percent of the MYOB Business Monitor’s rural respondents stated that the dairy price was hitting consumer confidence and 34 per cent saw that negative change in their revenue.
“While it is perhaps unsurprising to see that the rural regions are the most affected by the dairy price, it is worrying to note that 19 percent of rural SMEs said the impact on their revenue was significantly negative,” says Scollay.