North Canterbury Businesses Optimistic Despite Decreased Profitability

North Canterbury businesses are feeling the pinch, with over half reporting a decrease in profitability in the past six months.

That’s the key finding from the latest North Canterbury Business Opinion Survey released this month by Enterprise North Canterbury (ENC). The survey found that 55% of surveyed businesses reported decreased profitability while just 13% saw an increase. The resulting Net -42% is the lowest recorded since the survey began in 2013.

Survey author Miles Dalton of ENC says the decrease in profitability is no surprise given the rising cost of business, rising interest rates, and consumers tightening the purse strings.

“The biggest concern for North Canterbury businesses right now is the rising cost of doing business. Ninety two percent of businesses reported increased costs, and 57% of businesses named this as their single biggest limiting factor when it comes to profitability.

“On top of this, retailers have noted that consumers are being much more careful about where and when they spend their money.”

Hamish Keen of CBK Craft Bar & Kitchen in Kaiapoi has noticed a marked change in recent months. “We’ve definitely noticed a shift in consumer behaviour due to these economic pressures. With increased interest rates and inflation, it’s understandable that customers are becoming more financially cautious. For SMEs like ours, it’s about balancing the need to manage rising costs of goods and labour without overly burdening our customers. It’s a delicate balance to maintain affordability while ensuring we can still deliver the quality and service our customers expect.”

CBK Kaiapoi is one of a number of nationwide CBK outlets operating under the CBK Group. CBK Group CEO Dan Roos says the current pressure on businesses is apparent up and down the country.

“From Paihia to Dunedin, we’ve observed notable shifts in business dynamics nationwide,” said Mr Roos. “The increasing costs affecting various aspects of our operations highlight the need for strategic business management. The hospitality industry is known for its thin margins, and the current economic environment requires exceptional management skills to maintain profitability. A significant ongoing challenge for restaurants and bars is the rising cost of labour. It is essential for businesses to remain vigilant and adaptable, ensuring that labour costs are proportionate to their variable turnover, which can fluctuate significantly.”

Despite the difficulties with profitability, North Canterbury businesses remain generally positive about the future, with the survey showing that local businesses are more confident about the future of their business situation compared to a year ago (+29%), and are 48% more confident about the New Zealand business situation. Businesses across the country are also showing an increase in business confidence compared to this time last year.

Mr Keen puts this down to an optimistic attitude. “I believe that business owners are inherently positive individuals, driven by a desire to succeed for their teams and their customers. Overall, I think the increased confidence among local business owners reflects a resilience and an adaptive spirit. We recognize that by innovating and focusing on customer satisfaction, we can navigate through tough times and emerge stronger. This mindset fuels our optimism for the business climate over the coming months.”

The survey, which is undertaken every six months, includes responses from businesses in both the Waimakariri and Hurunui districts across various sectors. In addition to the statistics on profitability, cost of doing business and business confidence, the survey includes data on North Canterbury employment trends, investment and environmental sustainability.

The full survey results can be viewed here, and analysis is available on our Surveys and Reports page.