Companies gloomy about short-term business prospects
Construction, retail and property companies sit among the private companies that have become more pessimistic about their short-term prospects than they were 12 months ago, according to KPMG’s annual Private Companies Survey.
The survey of nearly 300 private companies conducted in April and May 2011 also shows that 44% of respondents did not meet their revenue targets in the past 12 months. More than 70% of the respondents had been in existence for two decades or longer.
Construction companies comprised 11.3% of the respondents, retail traders 7.9%, and property industry respondents made up 6.5% of the respondents, but the report was not broken down by sector.
Peter Siebels, head of KPMG’s Private Enterprise practice, said the past 12 months has proved very challenging for private companies. South Australian businesses were the most negative, with 26.5% thinking the Australian economy was on a downward cycle. Only 8% in Western Australia thought the country was on a downward cycle.
“The environment has been more tumultuous than many businesses would have expected, especially when you consider the spate of natural disasters.
“This survey on the outlook of Australian private companies is highlighting what appears to be a very unique set of business challenges and a patchy business environment,” Siebels says.
Skill shortages, softening consumer confidence and continuing global uncertainty are the key challenges facing businesses, which all lead to a multi-speed economy.
“The challenges vary between states. For example, the resource sector is going along nicely, but if you are a manufacturer in Victoria, times are very tough,” he says.
“While skill shortages are the biggest challenge to businesses in Western Australia, those in Queensland are more concerned with low consumer confidence, which may reflect the recovery from the floods and cyclones.
“In South Australia and Victoria, respondents are more concerned about business confidence and competitor activity.
“New South Wales is most concerned about the impact of continuing global uncertainty,” Siebels says.
One positive all states agree on is the opportunities arising from the digital economy. The survey found that despite 45% of respondents reporting an increase in online business transactions this year, less than 5% regard the growth of online business to be a major challenge.
“I don’t think Australian private companies are embracing the potential of the digital economy enough. Social media is a good example; only 31% of respondents have leveraged this technology into their business strategies. What private companies should be doing is understanding how these new technologies can provide them with more efficient ways of reaching their markets, or even reaching markets they haven’t reached before,” Siebels says.
One-third of respondents reported experiencing constraints to capital expenditure over the past 12 months, with the cost of debt and the availability of credit seen to be the biggest causes of that constraint.
Despite the short-term decline in confidence and multiple challenges, 72% of private companies still see a return to brighter business prosperity in the long term.
