Business confidence slips to seven-year low

Concerns about rising fuel prices, increasing interest rates and deteriorating consumer demand have pushed business confidence to seven-year lows, according to a new survey from Sensis.

The survey of 1800 SMEs found that business confidence has plummeted 16 percentage points since February to 33% – about half the level it was 12 months ago.

The longer-term outlook is even worse. Expectations about the strength of the economy over the next 12 months are now at their lowest point in 15 years, with over 40% of SMEs stating that they believe the economy will be worse in 12 months time.

Report author Christena Singh says small businesses are now the most pessimistic they have ever been about the future of the economy. “Over the last two years, finding staff has been the major problem facing small businesses. However, the most pressing concern for small businesses now is the economic climate, with the concern at the highest level in the 15-year history of the survey.”

Perhaps the best reflection of the pessimistic mood of SMEs was the profitability indicators, which has fallen 16 percentage points since February to -10%, the lowest reading since May 2001. Indeed, the survey found that almost half of small business operators believe they would earn more if they worked for someone else instead of operating their own business. One in five of these people believe they could earn twice as much working for someone else.

A separate survey by real estate firm Jones Lang LaSalle found the sentiment among Australian retailers has plunged from 26% in October 2007 to -54% in April 2008. This is the lowest recorded sentiment since the survey started in 1999 and only the fourth time it has been in negative territory.

But it is not all bad news; 77% of retailers remain committed to expansion plans, with 64% of respondents wanting to increase store numbers.

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