August 2021
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Inflation pressure triggers uncertainty and volatility for manufacturing sector -Rebecca Reed
Rapidly rising costs for businesses, a lack of skilled and unskilled workers, increasing inflation and shipping delays are putting huge pressure on New Zealand’s business environment and the consumer is about to feel it. The latest Hutt Valley Chamber of Commerce Business Confidence Survey found inflationary pressure is increasing and between a third and a half of all businesses are expecting to increase their prices in the next 3 to 12 months.
Electric Boat Building Company based in Seaview, Lower Hutt, says an increase in shipping costs coupled with severe delays of getting materials shipped to New Zealand is causing growing uncertainty around pricing for his customers.
It also found more than half of all businesses are expecting increased costs, yet less than 25% are expecting increasing profitability.
“The cost of the delay is also putting us under extreme pressure. It has had a huge impact on our business – we are talking hundreds of thousands of dollars. Due to Covid, the delay in getting product to us from overseas has meant the critical path of the project has taken longer, yet we still have overheads and staff to pay.
Covid-19 economic impacts, growing concern around government policy and labour shortages are holding businesses back nationally. The survey shows labour shortages as the single biggest barrier to business for more than 60% of businesses. This is at unprecedented levels. “The business environment continues to be increasingly difficult – while the economy has rebounded strongly and demand continues to be strong, the ability for firms to deliver is fraught with a wide range of risks and cost increases. “These cost increases and risks are more widespread across business type and size as all companies try to adapt to the rapidly changing business environment,” said Helen Down, Chief Executive of Hutt Valley Chamber of Commerce. Down says she is hearing from businesses unable to commit to fixed prices or a delivery timeline due to the totally uncertain environment. “This time last year our survey found business owners were experiencing small increases in costs and holding prices but now costs are increasing rapidly, and the consumer is only just starting to feel it. The situation is set to deteriorate quickly when businesses are forced to not only increase prices but not even commit to a set price in the next six months,” said Down. The Wellington Electric Boat Building Company is just one Hutt Valley business finding it extremely difficult to price any future work. The company, which builds electric passenger ferries in a range of sizes (16-24 metres), has achieved notable acclaim for building the first all-electric high performance passenger ferry in the Southern Hemisphere for East by West Ferries in Wellington. Fraser Foote, the owner of the Wellington
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“Previously we would order some fibreglass from American or Asia that would take 6 weeks to get here, now we are experiencing a 16-week timeframe. “The increased costs and delays mean we can’t commit to a fixed price for our customers. The fabric of our business and society has changed for the foreseeable future. I can see this continuing on forever and I think the uncertainty of supply and delivery pricing is now the norm.”
Staying true to your clients Helen Down says if the fabric of our business and society has changed indefinitely, businesses need
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