Who cares if businesses are confident?
When we talk about business conditions and how our local economy is tracking, why do we care about business confidence? Do we really need to care?
Short answer: yes, we should be interested and we should care a lot, because business confidence or the lack thereof directly relates to employment and investment by businesses, or what we on the ground tend to refer to as jobs.
So, when the Geelong Chamber of Commerce and Deakin Business School released the 2017 Geelong Business Trends Survey this week, we were curious indeed to see what the survey revealed.
Overall, the findings of the survey were decidedly upbeat. To put that into some sort of context, businesses who are members of the Geelong Chamber of Commerce were surveyed by Deakin Business School in September and October of last year, when the the upheaval at City Hall that led to the sacking of the Council and the institution of the Council Administrators was still quite fresh, and during the period that Ford closed its manufacturing plant in Geelong.
Confidence amongst respondents was up, with around 77 per cent of businesses expecting an increase in profit and 46 per cent expecting to see more people working in their organisations in the next financial year.
Business performance over the past financial year was, as you might expect, a mixed bag, with 70 per cent of businesses reporting sales growth and 63 per cent having seen their profitability go up. On the other end of the scale, more businesses had seen sales (23 per cent) and profitability (24 per cent) fall.
Who was up and was who down? I bet you can guess, although there might be one or two surprises.
Business Professional and Commercial Services firms are largely going along nicely, with 82 per cent reporting high levels of confidence and 65 per cent (down from 75 per cent last year) reporting profit growth. But the really good news was in manufacturing, with a surprising 92 per cent of survey respondents from the sector reporting high levels of confidence, despite the proportion of Manufacturing Transport and Storage businesses reporting an increase in profits falling from 75 per cent to 56 per cent.
There have been some significant gains across local manufacturing of late and perhaps those high levels of confidence have come from manufacturers having pivoted their business models to meet changing market expectations and making new deals on the back of that. We will watch the profitability numbers in next year’s report with interest.
Chamber President, Bernadette Uzelac, was cheering on the manufacturing results, saying, “Our manufacturing sector, which has been the backbone of Geelong’s economy for more than a century, is reinventing itself from its ‘tradition’ base into new niche areas that will drive our economy forward.”
Hardly surprising were the results showing that the local retail sector is in a slump. Across the sector, 42 per cent of respondents reported a low level of confidence about the year ahead, and only 53 per cent recorded an increase of profits, down from 80 per cent the previous year.
Deakin Business School Professor, Barry Cooper, said the survey results were a reflection of a city that was embracing the challenges of change.
“As a city in transition, it is common to see some ups and downs in business performance.
“It was therefore encouraging to see that despite some businesses not being as profitable as expected, overall 89 per cent of those surveyed reported an increase or no change in the number of employees in 2016, with 46 per cent saying they expect to take on more staff in the future.”
Deakin University Vice-Chancellor Professor Jane den Hollander AO launching the Geelong Business Trends Survey. Photo: Alan Barber / Barefoot Media
As to what local businesses saw at the time as the biggest barriers to growth, a telling 25 per cent said poor local government leadership, policy or support was the greatest barrier to business growth. The message to the then newly appointed Administrators was clear, we want to push ahead and grow and we need you to be on board. And this wasn’t the only area where government was seen to be having an impact on business performance. The Education, Community Services and Government sector respondents reported a drop in confidence levels, perhaps reflective of a dearth of good policy, leadership and consistency across all levels of government. Nothing in more unsettling to publicly funded sectors than tremulous hands on the policy and purse strings.
As Alice said the White Rabbit, we remain ‘curiouser and curiouser’ to see what the year ahead will bring.