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Business concerns intensify as Omicron delivers uncertain conditions ahead of Christmas

- December 16, 2021 3 MIN READ
The spread of omicron is causing business uncertainty

The CPA Australia has revealed economic confidence has improved over the past few months for the nation’s business owners, but uncertainty remains following the emergence of Omicron.

CPA Australia latest survey of business and economic conditions is part of a longitudinal study canvasing the sentiment of its members. Previous surveys were conducted in August and October.

Over the past three months, business owners concerns over rising costs and inflation have continued to grow, up from 19 to 36 per cent as inflation bites. Skills shortages have also caused businesses to decline work or operate at reduced capacity. While fear of further lockdowns continues.

Business confidence tempered by concerns

While economic confidence is rising it is bringing with it a new set of challenges, according to CPA Australia General Manager External Affairs, Dr Jane Rennie.

“Even though states and territories have released re-opening roadmaps, accountants clearly aren’t convinced we’ve seen the end of lockdowns. The results suggest lingering concerns that governments may re-introduce them, regardless of what’s been stated.”

Skills shortage is an issue

Between October and December, the number of accountants worried about skills shortages doubled, from 15 to 30 per cent. Problems attracting and retaining talent jumped from 38 to 46 per cent over the same period.

“Workforce shortages are reducing the pace of business recovery. Already, our members are telling us that labour and skills shortages are leading their businesses or business clients to decline work or operate at a reduced capacity.”

Rising costs stymying business growth

Inflation is also a growing concern. The percentage of accountants worried about increasing costs almost doubled from 19 per cent to 36 per cent between October and December. Supply concerns increased over the same period, from 17 per cent to 25 per cent.

“Businesses have limited wriggle room to pass price rises on to customers before they balk at making purchases. If businesses must absorb these costs, this will eat into their margins right when they should be focused on re-building their profitability and cash flow.”

Business solvency concerns have risen somewhat over the past two months. The number of accountants who expect their employer to have difficulty repaying their debts rose from 14 to 20 per cent between surveys.

“With many businesses having to start repaying deferred rent, loans and state taxes in the next few months, this may put the pinch on their cashflow. Added to this, taxpayer support of businesses has largely ended. This combination of factors is likely to reveal cracks in the financial health of some businesses.”

Borders reopening improves business conditions

The survey results revealed a boost in economic confidence over the next three months. “An uptick in short-term economic confidence is likely due to the re-opening of the NSW, Victorian and ACT economies.”

However, business confidence in the short term remained static despite restrictions easing. Seventy per cent of respondents are confident in the expected performance of their business over the next three months, the same result as October.

“Our members are sensing some brittleness to the recovery. Workforce shortages, increasing costs, supply difficulties and uncertainty about how governments may manage future COVID-19 outbreaks have accountants feeling apprehensive.”

Accountants sit at the heart of business and therefore see business trends before they show up in economic indicators. CPA Australia is urging governments to find ways to support business to prevent the challenges identified in our survey results from becoming entrenched.

“Barring further lockdowns, the time for large-scale, direct financial support of business is over but the ongoing challenges facing businesses are real. Governments at all levels should be looking for ways to create a business-friendly environment.

“Governments and regulators put a lot of changes on hold over the past 18 months. Now is not the time to play catch up with this backlog of stalled projects. Businesses need breathing room to deal with the current crop of challenges facing them.”

CPA Australia recommends that governments:

  1. Continue to roll out their COVID re-opening roadmaps.
  2. Actively promote Australia as a career and study destination.
  3. Delay new regulatory requirements unless they directly benefit business.

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