New Zealand businesses are looking to 2012 with renewed confidence, according to the findings of the latest Grant Thornton International Business Report (IBR).

New Zealand businesses are looking to 2012 with  renewed confidence, according to the findings of the latest Grant Thornton International  Business Report (IBR).

The quarterly survey  noted a cautious increase in optimism; with many indicators pointing to growth  plans among employers and most employees will get a pay rise next year.  Expenditure on Research and Development, however, looks set to take a back  seat.

After a bullish  outlook early in the year, business confidence dipped last quarter but has now  taken an upturn with 36 per cent of respondents more upbeat compared with 32  per cent in the previous period.

This contrasts with  New Zealand’s major trading partners who are viewing the New Year less  favourably. Confidence among Australian businesses declined for the fourth  consecutive quarter, now standing at 24 per cent; the US at one per cent and  the UK at minus 35.

Peter Sherwin,  partner, Grant Thornton New Zealand, said that in Australia the recession had  been masked by the profitable extractive sector but the wider business sector  was now beginning to experience a lack of demand coupled with signs that the  property bubble is about to burst.

“In New Zealand our  rural sector has a far more widespread effect because there is barely a city,  town or province which does not have some farming component. The benefit is  that when the rural sector is doing well it feeds right throughout New Zealand.  There’s a far greater distribution of  benefits than from the extractive industry in Australia, which is far more  geographically defined.”

Sherwin said that  while tourism was challenging, New Zealand had been able to swop the  traditional visitor markets of Europe and the US for Australia and China.

Higher dairy prices  have also had a flow on effect to trends predicted for 2012. More than half of  respondents (56 per cent) are expecting increased revenues and 47 per cent are  planning to invest in plant and machinery.

However, Sherwin was  concerned at the dip in those businesses planning to invest in Research and  Development, now at minus four per cent.

“R&D traditionally  takes a back seat when there is a constrained economic environment and  profitability is hammered. But it’s a worry. You can’t reduce the investment in  R&D for a sustained period without killing your business.

“If we want to take  New Zealand into a fully developed economy moving up the OECD scale, we will  have to do more than export primary produce.   I think this anticipated decline in R&D investment is a real danger  signal. It’s a call to action and it needs leadership from the Government to  help businesses be more open to R&D,” Sherwin said.

The survey indicates  that businesses are cautious about employment opportunities over the next year  with 26 per cent expecting to increase their workforce, a significant drop of  23 per cent compared with the previous corresponding quarter. But, at the same  time, they see a lack of skilled workforce as a major impediment to growth in  2012.

Sherwin attributed the apparent discrepancy to an  overall caution among employers after “a couple of false dawns” but they did  signal concern about availability of skilled workers – 39 per cent, which was  12 per cent higher than the previous corresponding period in 2010.

“We have unemployed people but do they have the  skills for the jobs that are going to be available. This gets back to one of  the real challenges for New Zealand, which is to get a better match between  tertiary education and industry. I think there is a clear disconnect between  what the education system is producing versus industry demands.”

Sherwin called for a tripartite collaboration  among  industry, the education sector and  government to improve the “connection.”

Good news for employees in the report was that 79  per cent of employers were planning to provide workers with a pay rise over the  next year (55 per cent in 2010). Of those, 62 per cent said the salary increase  would be in line with inflation and 17 per cent said it would be by more than inflation.