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Decrease in business confidence due to increasing costs

Increased operating and labour costs are the top concerns in middle market businesses across Australia, according to Pitcher Partners’ first Business Radar report for 2024.

May 06, 2024, updated May 06, 2024
A new report from Pitcher Partners has provided insights on changes in business confidence. Photo: File photo

A new report from Pitcher Partners has provided insights on changes in business confidence. Photo: File photo

The report showed confidence was declining in middle market businesses across industries in Australia.

The independently commissioned report involved 152 business leaders, with most respondents focusing their responses on the rising costs of business, rapid advancements in technology and a shift in consumer expectations.

Partner at Pitcher Partners Adelaide Chris Hanna said the survey responses indicate the ever-changing factors that influence business confidence.

“Last year, we saw business leaders stop seeing the pandemic as a significant factor affecting business confidence, moving more towards the impact of the global response to the pandemic, being inflation and higher interest rates,” Hanna said.

“Now, business leaders have their focus more squarely on local factors impacting their businesses – managing increased demand along with the increased cost to do business.”

Over 40 per cent of firms with more than 200 employees indicated the rising cost of employing workers was negatively impacting their outlook on the business.

Of firms with more than 200 employees, 32 per cent of respondents listed increased operating costs among their top three concerns, with 38 per cent listing inflation as a concern.

Despite these outlooks, 43 per cent of respondents said the rising demand for products and services left them optimistic, which was more than double from the respondents in the previous 2023 survey.

“The business landscape remains challenging, with cost pressures emerging as the predominant factor eroding confidence across our client base,” Hanna said.

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“The top four factors negatively impacting business confidence are all cost related – escalating operating expenses, rising labour costs, persistent inflation, and increasing interest rates have created a perfect storm for many enterprises.

“Operating costs, in particular, have witnessed a substantial surge… this sharp uptick reflects the multitude of challenges businesses are grappling with, from soaring input prices and supply chain disruptions to heightened regulatory compliance costs,” he said.

Among the top reported barriers to success, poor financial management, a lack of strategic vision and the inability of leadership to adapt swiftly to the evolving business landscape ranked highly.

“In the current business climate, characterised by robust demand and elevated costs, the value of long-term planning has become abundantly clear,” Hanna said.

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