Australia | Oct 18 2012
– Regus and CBA business confidence reports released
– Large businesses more confident than SMEs
– Retail confidence surprisingly strong
By Andrew Nelson
Two business confidence surveys hit the street yesterday and what they show is that while times may be tough, Australian businesses remain optimistic.
We’ll start off with the release of the Regus Business Confidence Index, based on a survey of more than 24,000 senior managers and business leaders across 92 countries. The latest results show that business confidence levels in Australia have remained positive since the last survey in April 2012. In fact, the overall confidence read has lifted by two points from 114 to 116.
Yet while Australian confidence improved, the global business confidence read actually declined over the past six months, dropping from 113 to 111 on the survey index. The UK read is well short of Australia, sitting at 94 points, while the US read of 107 is also well lower than Australia's.
The report indicates the proportion of companies in Australia reporting revenue increases over the past year improved, climbing to 53% compared to 46% in April 2012. Australian companies reporting profit growth also increased, up to 48% from 40% in April 2012.
However, the report also showed a few areas that should be concerning to Australians, with business confidence in key trading partner China down from 130 to 110 since April. This could well have implications for demand levels of Australian exports, especially if the Chinese economy continues to soften towards the end of 2012.
Jacqueline Lehmann, Regus’ Country Head for Australia also sees another emerging issue, a widening confidence gap between SMEs and large businesses. The report notes that SMEs are far less confident than their larger peers, with small business confidence at 108 on the BCI compared to 138 for large businesses.
“This is concerning given the important role of SMEs as an engine of growth and provider of jobs. We expect to see further trends towards flexible services from both small and large companies, as businesses are seeking to be more agile and free-up cash for investment without relying on credit at a time when it is so difficult to secure,” said Lehmann.
Commonwealth Bank’s latest report on Australian business confidence levels, also out today, reads like a fairly similar story. This survey focuses on mid-market companies (turnover between $10-100m), rather than the entire marketplace. The read in two words: cautiously optimistic.
The bank reports that while business sentiment has decreased, down five points from 9.3 to 4.3, confidence levels are still way higher than 12 months ago when the read was at minus 0.3.
Surprisingly, retailers have climbed out of the red and jumped 11.2 points to 10.2 on improved business conditions and better plans to deal with future volatility. The latest report also shows confidence in the mining sector is up by seven points to 17.7 on the back of positive results.
On the downside, we see sectors including construction, business services and transport & logistics all posting decreases as profits have fallen and risk appetite has left the market. There sectors were down 11.1 points, 17.9 points and 18.2 points respectively.
CBA’s Executive General Manager of Corporate Financial Services, Symon Brewis-Weston, notes that despite some signs of cautious business sentiment, the results over the long run show Australia’s mid-market is a better place than it was at this time last year, with half of respondents expecting revenues to increase.
“Confidence in the mining sector continues to surge, however, the surprise for many is the rise in confidence in Retail which has seen a significant turnaround. Retail is often a bellwether sector for the broader economy so this is particularly promising,” said Brewis-Weston.
Looking back over the last six months, the report shows business conditions have remained steady, with 51% of mid-market companies reporting increased revenues and 46% reporting higher profits. Transport & Logistics, Finance & Insurance and Wholesale Trade companies saw the largest revenue increases.
Looking ahead to the next six months, CBA notes most companies expect to see operating costs rise due to rising energy prices, while risk appetite has fallen as business become more reluctant to invest in more staff or higher capital expenditure. The report shows mining companies in particular are less likely to undertake new capital investment, with just 29% saying they plan to increase expenditure. This is down from 45% at the time of the last index.
Other than that, Brewis-Weston notes business conditions have remained steady, with most mid-market organisations feeling prepared for future volatility. 43% believe increased demand and improving consumer confidence means they will hopefully be looking to grow over the next six months. A “very positive sign,” concludes Brewis-Weston.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.