One in five businesses are looking to cut staff because of the spiralling cost of doing business.

The Business Conditions Survey – the most informative temperature check of business conditions in NSW – has found many enterprises are looking to batten down the hatches to survive interest rate hikes, spiralling energy costs and supply chain issues.  

The survey of more than 1200 businesses has revealed 59% of owners will maintain the same headcount while only 19% are looking to bring people on. 

The remaining 22% of business owners intend to cut staff, with the highly casualised workforces of arts and recreation, accommodation and food services and retail most likely to be the sectors hardest hit by job cuts.  

Business NSW CEO Dan Hunter said enterprises are feeling the pinch.  

“Businesses were looking forward to expanding post-lockdown but what we are seeing is business owners going into survival mode in the next year,” he said.  

“It’s worrying to see staff cuts emerge as a response to the cost increases.  

“Many business owners have been absorbing price increases into their profits, but this can’t go on forever.  

“Now we are seeing the result of softening demand and what is a likely increase in unemployment across the state’s economy.”       

Housing shortages have also emerged as a sleeper issue impacting business.  

More than one in three (35%) of business owners refer to affordability of housing for workers in nearby areas as the biggest barrier to hiring new employees.  

More than half (59%) also said higher wages demanded by workers was the other biggest barrier to hiring new employees.   

On a positive note, businesses are highly motivated to buy local products.  

The survey found the biggest barrier to buying local is that there are no local options. 

“Businesses are motivated to buy local and grow the state’s economy but have been unable to do so because the products are simply not there,” Mr Hunter said.  

“This presents a key opportunity for government and industry to work together on growing our domestic manufacturing capability.”  

Other key findings include:  

•             The rising cost of doing business is the biggest barrier to operating at full potential. This is because of inflation. It has implications for business expansion.

•             Concern about interest rates has been steadily rising across all indicators since this question was first asked in July 2022 (when the RBA cash rate target was 1.35%). The question was repeated in October/November 2022 (2.85%) and February 2023 (3.35%).   

•             Businesses in East Sydney and Western Sydney are the most likely to move interstate or offshore. The Hunter Valley and Richmond-Tweed are where businesses are most likely to close if the government does nothing to improve business conditions.  

About Business NSW

Formerly the NSW Business Chamber, Business NSW is the peak policy and advocacy body which has been representing businesses in NSW since 1826.