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Supply chain issues continue to ease for SMEs, but labour shortages remain a major problem for a third of businesses, recent NAB research shows.
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Labour shortages a ‘significant issue’ for 1-in-3 SMEs
21 August 2023
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The latest NAB SME Business Insights survey indicated that supply chain pressures eased further for Australian SMEs in the second quarter while labour shortages were more problematic.
Supply chain issues have moderated for the fourth straight quarter and are expected to be less problematic in the next 12 months.
When asked to rate the extent it was an issue for their business over the last three months, SMEs scored 3.8 points out of 10, down from 4 points in the first quarter and a survey high of 5.1 points at the same time last year.
SMEs also expect there will be less disruption to their business from the supply chain in the next 12 months, scoring 3.7 points overall, down from 5.1 points at the same time last year.
The NAB survey found that supply chain issues caused less disruption for SMEs in most industries in the second quarter, with the exception of personal and business services.
Supply chain pressures had the biggest impact on the retail sector, wholesale trade, and construction.
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Fewer SMEs in all industries reported a very significant supply chain impact in the second quarter, apart from personal services (17 per cent up from 9 per cent), health (9 per cent versus 3 per cent), and manufacturing (18 per cent versus 15 per cent).
It was much lower in wholesale trade (12 per cent versus 22 per cent) and transport and storage (9 per cent versus 20 per cent). Overall, it was highest in manufacturing and retail (18 per cent) and lowest in business services (3 per cent) and accommodation and hospitality (4 per cent).
“Looking ahead 12 months, the outlook is mixed. SMEs believe supply chain issues will improve most in construction, accommodation and hospitality, and transport and storage,” the survey said.
“In contrast, SMEs operating in personal services and business services expect supply chain issues to be somewhat more challenging for their businesses.”
Labour shortage more problematic in the second quarter
While supply chain issues eased in the second quarter, SMEs were more pessimistic about labour shortages, the survey indicated.
Labour shortages were a “very significant issue” for one in three SMEs, the survey revealed.
When asked to rate the extent it was an issue for their business, SMEs on average scored 4.9 points out of 10, a slight increase from the first quarter of 2023.
SMEs are also more concerned about the impact of labour shortages on their business over the next 12 months, with the average rating of 5 points, an increase from 4.7 points in the first quarter.
“Labour shortages continue to impact SMEs differently according to the industry they operate in. In the second quarter, labour shortages continued to have the biggest impact in construction at 6 points, followed by transport and storage at 5.6 points, and retail at 5.4 points. SMEs in accommodation and hospitality were the least impacted,” the survey said.
Other industries that reported a somewhat bigger impact on their business from labour shortages in the second quarter included personal services that increased to 4.3 points from 3.7 points in the first quarter, finance and insurance at 4 points, up from 3.6 points, and business services at 4.7 points, up from 4.3 points.
“Looking forward, SMEs in most industries expect labour shortages to have a bigger or unchanged impact on their business in the next 12 months, except in wholesale trade where the outlook is slightly better,” the survey said.
“SMEs in finance and insurance and business services anticipate a noticeably bigger impact on their business in the next 12 months, but it will be most pronounced in construction.”
NAB said it expects the labour market to weaken with the rate of employment growth to slow and vacancies to fall over the second half of the year and through 2024, as the economy weakens enough to see the unemployment rate rise to around 5 per cent by end-2024 from the near 50-year low of 3.6 per cent.
“This would be a considerable rise but, importantly, would still leave unemployment around its pre-COVID-19 level,” it said.
“With international borders now open, increased skilled migrant quotas and improved skilled migration program processes, there has been an easing of shortages in some industries. But for others, it will take time before these changes have a material impact with many firms continuing to experience severe recruitment difficulties.”
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