Most South Island firms are reviewing their internal structures to cope with anticipated zero or negative growth during the next two years, a survey of South Island business leaders released yesterday reveals.
The five-year outlook is more positive, with three-quarters of all respondents expecting their businesses to grow.
The survey is the third conducted by accounting firms Polson Higgs and McCulloch and Partners.
It was completed in early December.
Polson Higgs partner Michael Turner said in an interview the survey found more than half the 55 respondents expected zero or negative growth in their markets through to the end of 2010.
Compared to six months ago, business optimism had slumped from 30% expecting high market growth in the next five years down to to just 16%.
In May, only 4% of respondents expected business to contract in the next five years, but that had jumped to more than 18%.
More than 70% of firms were reviewing internal structures to deal with the expected downturn, with the main challenges perceived as cutting costs and retaining talent.
Only 6% had no specific actions planned to cope with the economic difficulties foreseen.
Asked if he was worried about the gloomy outlook from the survey, Mr Turner said he would have been more concerned if businesses were not planning for a downturn.
"We would encourage any business to start thinking about its costs but to take a balanced approach."
A good business climate during the past few years might have encouraged some businesses to be casual in their costs.
Belt-tightening during a recessionary period was essential but stopping all spending on things like marketing would probably mean a decrease in sales.
Everything had to be considered in the mix, he said.
Reserve Bank governor Alan Bollard had last week said New Zealand was coming out of the recession, but those results were not shown up in the survey.
Mr Turner said that six months ago when Dr Bollard said New Zealand was heading for a slow down, the survey results then did not indicate any downturn.
"Dr Bollard can now say everything is hunky-dory, but it will take six months for the survey to show an improvement.
"I certainly hope he is right, for the sake of these businesses."
The survey also showed businesses now attributed less importance to environmental issues with two-thirds saying they were not significant, compared to about 50% in May.
