Waikato business survey reports mixed signals

A survey of 589 Waikato business owners and managers has found that while overall economic sentiment is pessimistic, the region’s businesses are more optimistic about Waikato and sector performance than they are about the New Zealand economy as a whole.

This optimism is demonstrated by businesses signalling they are actively recruiting new staff, despite an environment of skill shortages and overall sales sitting below 2019 levels.  Businesses’ lack of planning for future scenarios, however, is of concern.

Carried out between 3 August and 4 September 2020, the Waikato Business Sentiment Survey is the first of its kind for the region. It was conducted by Te Waka in partnership with local authorities, chambers of commerce, regional tourism organisations, business associations and other economic development partners in the region.

Te Waka chair Hamish Bell says the survey showed Waikato’s net business confidence in the Waikato economy (-14%) is better than their overall confidence in the national economy (-31%).  Respondents hold a less positive view than the -26% seen nationally through authoritative economic surveys, such as the ANZ Business Outlook, which has this week released preliminary September results.

“While we need to acknowledge the challenging economic environment, there is optimism in certain sectors, notably the professional services sector, including administration and support services and the agriculture sector.

“Those sectors have shown the fastest growth within the region since 2000, and it is understandable that they are more upbeat.”

The survey results revealed worrying trends related to business planning and preparedness. For businesses with 1-10 employees, 50% do not have business plans, 58% have no cashflow forecast and 78% have no business continuity plan.

“Despite this lack of planning, the survey results indicate Waikato businesses feel they have a handle on the current economic situation, even though many have been forced to apply for wage subsidies and have seen sales drop,” says Bell.

“The survey does raise questions about Waikato businesses’ preparedness. They need to start thinking ahead about future scenarios. It’s imperative they are ready to quickly respond to a rapidly changing environment and remain agile.

“Tackling this disruption presents opportunities as firms are forced to innovate, take risks with bold thinking and step out of their comfort zones. No business can afford to become complacent in the year ahead,” Bell said.

Waikato businesses are generally confident they have the skills and resources required to tackle the challenges ahead. Only 36% of businesses surveyed said they needed external advice or support to move forward.

“I’m not sure this is a good thing or if it shows complacency and a lack of appetite to really kick on,” says Economist Cameron Bagrie who reviewed survey results this week to offer his view on the findings.

Skills shortages come through as a clear concern for Waikato businesses, with 54% of survey respondents believing there is a skills shortage. This trend is particularly pronounced among businesses with 11 or more employees, with 74% of these identifying a skills shortage and the construction sector where 95% of respondents noted this as a challenge.

“While there were skills shortages before Covid-19, the pandemic has accentuated them, especially for sectors such as construction,” says Bagrie.

“There are some massive changes that need to take place in certain industries, particularly across the education and training sectors, to reset for the slow reversal of globalisation and the changed immigration outlook.

“Ultimately, what matters is firms’ belief in their own businesses, which is what they can directly control and influence.

“On average the Waikato businesses surveyed rate confidence in their own business at 7.1 out of 10, which is a good result. This indicates a general feeling that Waikato businesses are looking to rebuild, which is evident in the reported staff recruitment plans.”

Survey results show that over the next six months 28% of Waikato businesses expect to hire staff, with only 11% expecting to decrease staff numbers. This trend is more evident in businesses with more than 11 full-time staff, with 39% of these expecting to hire and 15% requiring less staff within the next six months.

Survey results also show, by and large, Waikato businesses expect their sales revenue in the second half of 2020 to be below 2019 levels, though by a far lesser margin than what was seen between March and May this year.

The Waikato Business Sentiment Survey will be conducted regularly. Hamish Bell says the findings will give the Waikato a stronger voice when advocating to Government.

“This data will be valuable to policymakers as well as Waikato businesses. It can be used to inform the delivery of business support across the districts, including how this support is communicated and distributed so it reaches those with the greatest need.

“This inaugural survey shows there is more work to be done. The Te Waka team will now use the survey insights to guide our economic development work with our regional partners, who are the enablers for business,” says Bell.

View the survey results 

Comments from the Business Community and District Councils

The lockdown bit hard over the March-May period; more than a quarter of respondents across the region saw sales drop off by half or more compared with a year ago. Expectations for the second half of 2020 are better for most, but still nearly 70% see sales static or lower than a year ago.

“It’s heartening to see that, despite all that’s gone on since the start of 2020, two-thirds of Waikato businesses in the survey are looking to the future with at least some degree of confidence. Of course, the flip-side of that is that one-third have much less confidence in their future success,” said Waikato Regional Council chair Russ Rimmington.

“Despite being in its infancy, that’s where Te Waka will play an important role – providing a highly professional one stop shop where businesses and central government can source information and help navigate the minefield that is often so daunting. 

“Waikato, at least, looks like a better place to be than most others, and a decent number of organisations are looking to take on workers. But there seems to be a mismatch between the skills of those available for work, and those that job-rich businesses need. There is a clear need for our education and training organisations to step up here. 

“A key to the resilience of the Waikato region has been the agriculture sector and, despite agribusiness being under-represented in the survey, this shows through in the more positive – or at least, less pessimistic – outlook for the economy.”

“The information in this survey provides a different dimension to official statistics and other data. What it can tell us – that other statistics can’t in the same way – is information about some of the problems businesses are facing now, and what their intentions are for things like hiring and investment in the near future.

While interpreting survey responses is not always straightforward, these results help to confirm many of the things we’ve seen in other data or anecdotal information – that sales have been hard hit; that many jobs have been lost; and that it could have been much worse without assistance like wage subsidies.

The survey results also reflect the very high levels of uncertainty we all face. For instance, a majority of businesses across the region seem to have reasonable confidence in their own prospects, and yet most also see static or declining sales and a further deterioration in the wider economy.

This is not surprising – while businesses may have a good sense of their own situation, nobody knows whether the virus will re-emerge, how much the weakness of the global economy will flow through to us here in the Waikato region, and what other ‘unknowns’ lie in wait for us.

Hamilton Mayor Paula Southgate says the survey results highlight the resilience and strength of the Hamilton and Waikato people.

“These are tough times for business owners and their staff, but I am once again heartened by the way our region responds in difficult times, and by the determination and confidence of our business sector. Survey results show that more than 80% of Hamilton businesses expect to maintain or increase staff numbers, which is a great sign for our region,” Mayor Paula says.

“This kind of research is invaluable. The more we understand the challenges faced by those who drive our local economy, the more we are able to respond to their needs as well as advocate on their behalf at a national level.”

“I’d like to acknowledge all those who took the time to take part in the survey, as well as the Waikato business support and analysis provided by Te Waka. Their expertise and passion for our people is a real asset to our region as we rebuild and recover from the economic impacts of Covid-19.”

“These results reinforce our conclusions from earlier surveys the Chamber has done. Confidence by our members in the Waikato economy remains strong and they are more optimistic about local Waikato conditions than they are about the wider New Zealand economy.

“Chamber members are very confident in their own businesses and their industry sector, with exceptions being some smaller sized companies who are struggling and obviously those in Hospitality and Tourism. Our Infometrics economic activity indicators confirm those feelings of optimism that have come through in this survey.

“However, with just over half of the respondents expecting sales in Jul-Dec 2020 to be lower than last year, it reinforces the view that businesses conditions moving ahead will remain tough and support from regional and national agencies will need to remain in place. The immediate lockdowns appear to be over, but the battle by businesses to survive and flourish is still raging, and that continued support will be important.”

The Thames-Coromandel economy was one of the hardest hit by the pandemic, as tourism activity plunged.

“Tourism is one of our biggest earners and our business community took a severe hit when COVID slammed the door to international tourists shut,” Thames-Coromandel District Mayor Sandra says.

However, the survey findings demonstrate the resilience of local businesses, with only 14 per cent forecasting sales for the second half of 2020 will be more than 50 per cent lower than the same time last year. Meanwhile, 65 per cent of local businesses didn’t expect to change the number of full-time employees over the next six months. In fact, 20 per cent of the businesses said they expected to increase full-time employees by up to five people.

“I’m proud of how tenacious our businesses and our people are as they continue to overcome the challenges life throws at them. We are optimistic, adaptable and resilient,” Mayor Sandra says. “You can see this reflected in the data and how many businesses have moved into developing the digital paradigm and more online offerings of their products and services.

“Confidence is going to be key over the next few months, and we are here to help businesses stay optimistic, particularly in the tourism, primary industries and service sectors.

"Winter is always our quiet season for visitors, and we anticipate domestic tourism activity, which makes up a significant share of our market, to pick up heading into summer," Mayor Sandra says. 

“The South Waikato is a resilient and spirited community and has approached the challenges of COVID-19 with typical determination, pragmatism and some optimism from certain sectors. It is heartening that overall 17% of businesses in the district expect to be employing more, rather than less, people in the next six months and with optimism about the future success of their business at an average rating of 7.2, I am encouraged that overall South Waikato businesses will handle the challenges of the current economic climate.

“However, a number of businesses are looking for support with marketing planning; digital enablement and business strategy and we are delighted the Government, through Te Waka Regional Business Partner programme, is offering free support to businesses that apply before the end of October. I urge all South Waikato businesses to make full use of this support. This survey is a first for this region and I commend Te Waka on the initiative as the information will be invaluable to guide the focus of delivery of business support services nationally, regionally and locally.”

“It’s pleasing to see most Waipa businesses are confident in their future outlook. On the flip side, three quarters of large businesses predict to have shortfalls in recruiting skilled labour, particularly prevalent in the construction sector. The survey also reported 75 percent of Waipā businesses accessing government assistance of some kind, so I’d also like to encourage them to meet with Te Waka’s Business Advisors to find out what support is available at a regional level. Being strategic, nurturing talent and providing training opportunities to upskill or retrain will be key success factors.”

“We have all been affected in some capacity and are fortunate here in the Matamata-Piako district that we have strong industry and dairying communities who have shown resilience and tenacity to get through what has been an uncertain time for many.

“The results of the Te Waka Business Sentiment Survey shows us COVID-19 has created havoc, which is to be expected – there are concerns over skill shortages and wage rates. Despite this, the survey also shows some businesses haven’t decreased their staff and business confidence remains reasonably high. The great thing is, there is support available, if you haven’t yet asked for help, reach out.”

“Thanks to everyone who took part in this survey, it’s given us some really useful insights into how our business communities are faring in these challenging times and where there might be a need for more support. Overall, it’s heartening to see that business confidence is still quite high in our district and we’ll continue to work with Te Waka to develop programmes and help out where we can.”   

“The results illustrate the uncertainty of the economic climate that we are in with COVID-19.  Clearly, a lot of our businesses are concerned about the future and there has to be concern about the end of the wage subsidy. I suspect the figures represented in the respondent perceptions are weighted by the cluster of tourism businesses in the Waitomo Village. Between 100-150 jobs have been lost on lockdown in the village. Tourism impacts have had a significant effect on our community.”

“The Ōtorohanga Community, the businesses and the people have been affected in various ways throughout 2020 due to the ongoing effects of the COVID-19 pandemic.

The resilience of our community is second to none. It is this strength that has carried us through these unprecedented times. However we, like many, have experienced loss and recognise that the continued uncertainty plays a major part in our world of today.

The summary of the Te Waka Business Sentiment Survey demonstrates the importance of being connected on various levels - locally, regionally and nationally. We are thankful that our resilience has enabled many local businesses to retain staff and that our rural economy remains steadfast as a large component of our overall economic contribution.  Business support is readily available and I encourage all businesses to take advantage of the tools and advice offered by Te Waka.”

Jason Dawson, Chief Executive of Hamilton & Waikato Tourism, was pleased to see a significant amount of tourism and hospitality providers across the region complete the Business Sentiment Survey.

“When the survey first opened at the beginning of August, the Waikato tourism region was buoyant and cautiously optimistic following a bumper July school holidays, achieving 19% growth in domestic visitor numbers during the July 2020 school holidays compared to July 2019” added Dawson.

“Unfortunately, the recovery of our visitor sector took a step backwards with the lockdown of the Auckland region - our biggest drive market from a corporate and leisure travel perspective. We immediately saw the cancellations of bookings for the next 2-6 weeks. Adding to our woes was the return of Alert Level 2 for the Waikato region, which has led to the postponement or cancellation of some events, and the return of physical distancing and compulsory contact tracing” says Dawson.

“It’s pleasing to business confidence on the rise across the sector as we were starting to the see the benefit of increased domestic visitors into the region, as well as the lift in expenditure from our local market too” said Dawson.