CCIQ Pulse data demonstrates new set of challenges in post-COVID business environment
Businesses are facing a new set of challenges in a post-COVID environment, with attracting and retaining employees, insurance costs and interest rates listed as the most significant impacts in a major shake-up of business growth constraints in Queensland in the past year.
CCIQ’s Pulse Survey of business conditions for the December quarter 2022 is out today shows retaining and recruiting workforces, wage costs and insurance costs have emerged as the most significant business growth impacts in a post-COVID environment in Queensland.
Level of demand and economic activity and political and economic stability were previously ranked among the most significant business impacts.
It comes as businesses reported on average operating levels had returned to pre-COVID levels for the first time since March 2020.
Across other business condition indicators, macroeconomic issues and ongoing high business operating costs are undercutting businesses’ long-term confidence in the future of the state and national economies despite steady business performance.
37% of businesses indicated their sales and revenue improved during the December quarter, crediting recovering consumer spending and increasing demand. It’s the third quarter to record an increase in sales and revenue.
CCIQ CEO Heidi Cooper said workforce, operational and economic conditions were presenting challenges this quarter and were expected to persist as the state’s businesses continued their COVID recovery.
“Over the past year there has been a major shake-up in constraints on business growth,” Ms Cooper said.
“Every quarter we ask the state’s business community how economic, operational and workforce factors affect them, with workforce factors like recruiting and retaining suitably qualified staff and direct wage costs the most significant impacts in the December 2022 quarter.
“This quarter’s data shows Queensland businesses are starting the year with a new set of challenges,” Ms Cooper said.
“In 2023 businesses across the state are telling us workforce issues will continue to impact them, particularly the recruitment and retention of suitable staff. Recruiting and retaining suitably qualified staff has been the top constraint on business growth for the past year, reflective of the tight labour market.
“Cost pressures have consistently increased over the past year and are likely to persist, in addition to rising labour costs, operational cost increases such as insurance premium costs and the price of energy.”
Macroeconomic challenges meant businesses ranked energy costs as having the most significant economic impact since 2018.
“Insurance costs have also been among the top five concerns for businesses since 2019 but this quarter we saw it move into the top three while transport costs also saw a rise over the past year,” Ms Cooper said.
“Close to half of businesses new survey expected the Queensland economy to perform weaker over the next 12 months and 53% expected the national economy to perform weaker.”
Small businesses ranked interest rate and economic activity levels to have more significant impacts than larger business.
Interest rates have not ranked in the top five constraints on business growth since December 2010.
Paul Milevskiy
Mansfield mechanic business owner and CCIQ member Paul Milevskiy has managed his business, The Torque Team, since 2016.
He said his most significant challenges in a post-COVID business environment were rising interest rates and the labour market risk to his business.
Mr Milevskiy said during COVID a lack of demand and economic activity was his most significant concern.
“Interest rates impact us in two ways. Like most businesses we have loans which means some of our profits are going into paying higher interest rates,” he said.
“But it also slows the economic environment because people are less likely to spend. We’re an auto repairs workshop so when people are uneasy about the economy they’ll put off getting their car serviced.”
Mr Milevskiy said his small team of three people had so far not experienced workforce impacts but he considered it a risk.
“The industry as a whole is struggling with staff but we haven’t been impacted by the labour crisis,” he said.
“The labour crisis is a risk however because a small team means if we lose one person for whatever reason, it’s a third of the workforce gone. It’s a major problem for the industry. It’s a bit scary.”
Mr Milevskiy said he planned to hire an apprentice in the next 12 months to boost profits and his business overall.
“The government has done a lot to incentivise businesses like us to hire apprentices. Hopefully it will help us grow a bit,” he said.
Key business indicators December 2022 quarter
- Confidence in the future of the state and national economies increased slightly in the December quarter however both remain weak. Confidence remains largely decoupled from actual business performance, which was relatively positive in the December quarter. This weak confidence is likely driven by macroeconomic issues relating to inflation and anticipation of a slowing economy caused through higher interest rates, as well as the workforce issues resulting from widespread skills and labour shortages.
- General business conditions in the December quarter decreased slightly, but remained satisfactory, largely as a consequence of solid sales. 33% of businesses reported stronger general business conditions, while 45% reported unchanged conditions from the previous quarter.
- Total sales revenue in the December quarter improved and indicates a further, but marginal, strengthening of sales.
- Operating costs during the December quarter continued to significantly rise, decreasing on half a point from the September quarter. 2% of respondents indicated decreasing operating costs, with 78% reporting increases.
- Labour costs in the December quarter continued to increase significantly. The labour costs index is expected to remain at high levels in the March 2023 quarter. 3% of respondents indicated decreasing labour costs, with 65% reporting increases.
- Close to half of businesses indicated their profitability weakened during the quarter and expect their profitability to continue to decrease in the March 2023 quarter, though to a lesser extent.
- Employment levels decreased in the December quarter but remained satisfactory, with 60% of respondents reporting unchanged employment levels from the previous quarter.
- The capital expenditure index in the December quarter indicated a moderate weakening of investment. Capital expenditure is expected to fall further in the March 2023 quarter however most businesses (56%) expect their capital expenditure levels to remain the same.
Editors note
To hear more about CCIQ’s Pulse Report for the December 2022 quarter, including insight from Paul Milevskiy and other Queensland businesses, register to attend CCIQ’s panel discussion event at Brisbane Business Hub on February 23: Doing business in 2023: What CCIQ’s latest Pulse Report findings tells us about the year ahead
CCIQ’s Pulse Survey has measured Queensland business confidence and expectations for more than 20 years.
The survey is unchallenged as the most authoritative, timely and comprehensive snapshot of Queensland business sentiment, providing critical insights into the opinions of business owners across the state.
Pulse includes detailed measurements on employment levels, turnover and business profitability – knowledge that adds a great degree of confidence to the strategic planning and future investment decisions.