Mood of the Market survey

Small to medium sized companies are optimistic about the future with 85 per cent confident that business activity will either increase or remain the same over the next six to 12 months, according to KPMG’s inaugural 'Mood of the Market' survey.

This compares with 13 per cent of respondents who believe business conditions could still get worse.

Mark Kippenberger, national managing partner of KPMG’s Business Advisory division says the Mood of the Market survey shows that confidence is also flowing through to attitudes about future staffing levels with 73 per cent of respondents expecting staffing levels to remain the same or increase in the next six to 12 months. Some companies (15.87 per cent) are even looking to employ more staff. 

“Small to medium businesses may be reluctant to let staff go after recently experiencing one of New Zealand’s tightest labour markets. Websites, such as Trade Me are also now experiencing a pick-up in job advertisements which demonstrates more companies are now looking to rehire and the skills shortage could resurface.”

When results are split between large and smaller turnover companies, staff redundancies are less likely for smaller companies (3.70 per cent) than larger companies (15.25 per cent). However it would appear that both large and small company employees are putting a greater focus on their own individual performance in order to retain their positions.

In a regional split, more redundancies are likely in Auckland than in Wellington and Christchurch with 16.6 per cent of businesses in Auckland expecting to reduce staff numbers in Auckland compared with only 4.5 per cent in Wellington and Christchurch.

“Security and keeping a job also appear to be good motivators for employees,” Kippenberger says.

“From the employers’ perspective there is a big change in the culture of their business with companies more focused on outcomes and everyone having to consciously contribute to the businesses.” Consumers are generally benefiting from better service.

The survey also showed that 67 per cent of clients prepare and communicate a formal business plan with over half, or 55 per cent, preparing and adjusting a business plan monthly.  When split between larger and smaller businesses, 80 per cent of larger clients with a $10 million or more turnover measured their business plan against their performance on a monthly basis with only 40 per cent of smaller clients (those with $1m turnover of less) doing the same.

“Smaller companies need to be more vigilant about preparing and adjusting their business plans if business conditions improve only marginally in the next six to twelve months,” Kippenberger says. “This is particularly the case when 42 per cent of small businesses say their major concern is managing their business cash flow and liquidity. Having access to cash is vital in an environment where debtors are reluctant to pay their bills but yours keep coming.”

However, in profitability terms more than 45 per cent of respondents say they hit above forecasted results from the previous year. This contrasts with 48 per cent recording below budget forecasts with 14 per cent of those being a significant 20 per cent below forecasts. “However, in a recession such drops are expected in a contracting economy. Also many of our clients are saying that this environment is a great leveler for their business.

In terms of Government performance, only 5.82 per cent of respondents say they are dissatisfied with the outcomes of the May budget. However, compliance tax remains an issue for the smaller companies who would like this addressed by the National Government. 40 per cent of large turnover companies say a major focus for the Government should be to bring back incentives for investment and innovation.

About the KPMG Mood of the Market survey

The KPMG survey was conducted between 6th and 13th of August and reflects the responses of 189 respondents from Auckland, Wellington, Tauranga, Hamilton and Christchurch.  Of the 189 respondents, 28.57 per cent are companies with revenues exceeding $1 million, 27.51 are companies with revenues between $1 million and up to $5 million, 11.11 per cent have turnover between $5 million and $10 milllion and 31.22 per cent over $10 million.  The maximum error is +/- 4.23 per cent.

Media Release: KPMG