Economy harder than GFC and Covid, say business owners

“That’s taking into consideration that many were in business during the GFC,” Business Changing’s principal of business consultancy Zac de Silva said.

The average company responding had 28.5 staff and had been in business for close to 17 years.

“The results show many businesses are hurting out there,” he said.

Three-quarters (75%) of businesses have or are actively cutting their costs in 2024, up from 63% in the 2023 survey and 55% in 2022.

The picture is particularly bleak for those surveyed in the retail and hospitality industry.

One in three businesses said they were worried about their survival, compared with the overall figure of 25%.

Some of the biggest issues for businesses were getting customers to buy; managing cash flow; cost increases from suppliers; and high interest rates.

Over half (54%) of respondents said their revenue had declined from May to July compared to a year ago.

The hardest hit sectors were tourism, with 75% of companies experiencing a decrease in sales, followed by construction (74%) and hospitality (69%).

Just under a third (29%) of companies said they had experienced sales growth in the three months.

“Common feedback was discretionary spending and disposable income is at an all-time low. It doesn’t matter what service is provided or how much promotion is done, if people don’t have the money, they just don’t have the money,” de Silva said.

Mental health was also an ongoing issue for business owners. Close to half (49%) of business owners were concerned about their personal mental health, compared to 52% last year and 59% in 2022.

Figures from Stats NZ show the value of electronic card transactions fell in July for the sixth consecutive month. Retail spending was down 0.1% or $6.3 million from June, while core retail (excluding motor vehicles and fuel) industries decreased 0.5% ($26m).

‘Treading water’

Andrew Fearnside, owner of artisan bakery Wild Wheat, believed the current economy was the hardest he had seen in the 25 years he had been in business.

“The GFC I don’t think affected everybody right across the board as what Covid did and then this [downturn] seems more widespread as well,” he said.

“We’re definitely treading water, certainly not getting ahead.”

Wild Wheat operates two outlets, wholesale supply and retail – where they have six shops in Auckland.

“Traditionally when things slow down like this in the past, wholesale will slow down because people stop dining out and tend to dine in more often, so the retail sales might increase or stay steady. And that’s what’s happening right now but retail’s also dropping off a little bit,” Fearnside said.

“Wholesale has been fairly severely hit. The hospitality industry in general is struggling.”

Fearnside was hopeful things would pick up particularly closer to the summer months and as interest rates come down.

“We’ll just hold on, tread water till October and then hopefully things will start to pick up.

“They have to pick up at some point.”

He said one important thing he had learned in business was the value of having a cash buffer.

“For me now this time around it’s a lot easier because I’ve been in business for a lot longer and therefore have been in this situation a couple of times.

“Having a little bit of a cash [buffer], it gives you a little bit of security and a bit of confidence… being able to be not comfortable but okay with treading water.

“When you do have some sort of cash reserve… which is something that I learned from the GFC and not having one and realising that when you’re short on cash the decision-making process becomes an awful lot more stressful because it could be make or break.”

Brighter days ahead?

According to the State of the Nation report, a net 7% feel negative about the outlook for the New Zealand economy this year, compared to a net 22% last year, and 54% in 2022.

A massive 80% of business owners said they had some confidence in the Government to get New Zealand through, compared to 15% a year ago and 26% in 2022.

The percentage of business owners concerned about Government decisions has dropped to 31% this year compared to 46% last year and 63% in 2022.

“The survey shows business owners are having a hard time but they’re slightly positive about the outlook for their business over the next 12 months due to their confidence in the economy improving with the government’s help,” de Silva said.

“Whilst recent times have been the hardest in living memory for many, there are some green shoots of positivity about the outlook.”

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics including retail, small business, the workplace and macroeconomics.