04/12/2008 - 09:55

WA posts biggest drop in SME confidence

04/12/2008 - 09:55

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Western Australia has suffered the nation's biggest drop in confidence among small and medium enterprises, according to the Sensis Business Index for November.

Western Australia has suffered the nation's biggest drop in confidence among small and medium enterprises, according to the Sensis Business Index for November.

The survey provides the latest snapshot of SMEs in Australia, with 1800 businesses surveyed.

Report author Christena Singh said business confidence had plummeted in WA on the back of sluggish demand and weakening economic conditions.

"Most of the eastern seaboard states have been experiencing extremely tough trading conditions during the last six to nine months and these conditions are now starting to be felt by small businesses in WA," Ms Singh said.

Business confidence in the state has fallen 29 percentage points over the last three months to 14 per cent. It is now only one quarter of the level recorded this time last year.

Ms Singh said it the fall translated into four out of 10 businesses in WA have been impacted by the economic slowdown.
In comparison, business confidence in New South Wales is the lowest in the nation at five per cent, while Tasmania has the highest level at 37 per cent.
"Overall, WA businesses are concerned about the economic climate, cash flow and lack of work," she said.

Demand for goods and services has deteriorated substantially in WA, with the sales indicator now at the lowest level since July 2001.

More than a third of businesses have experienced a fall in sales over the last three months and most were not expecting sales to pick up in the lead up to Christmas.

A lack of work has translated to falling profits for WA small businesses, with about four in 10 experiencing a decrease in profit during the last three months.

"Similarly, the profitability Index has not been this low in WA since July 2001," she added.

The economic climate has also seen continued weak capital expenditure by WA businesses.

"While there has been an improvement on the previous quarter, approximately one quarter of businesses reduced capital expenditure during the previous three months," she commented.

In addition to weak capital investment, four in 10 WA businesses impacted by the downturn have reduced or watched their costs closely.

After a prolonged period struggling to find staff, the report shows WA small businesses are now beginning to reduce staff numbers.

Over the last three months, 14 per cent of businesses reduced employment, and the majority of these did so because of weak business and economic conditions. By comparison, only 11 per cent increased the size of their workforce.

Ms Singh explained WA businesses were not optimistic about the economic climate over the next 12 months.

"Despite recent interest rate reductions, falling petrol prices and the announcement of a government stimulus package, more businesses in WA expect the economy will be worse off in the next 12 months."

Almost half of businesses believe the economy will be worse off in 12 months time, while only 13 per cent believe it will be better, with the remaining undecided.

However, she concluded that despite the substantial weakening in business conditions, the WA trading environment was tracking above the national average.

"WA has the highest expectations for sales, prices and profitability for the year ahead of any state or territory."

Meanwhile small business support for the WA Government rose 30 percentage points, taking the indicator to 8 per cent, making it the most supported government in Australia.

The report found the main reasons for the lift is the government's interest and support of small businesses.

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