Part Two: The New Zealand Small Business Environment
Since the publication of the SBAG report in August 2004, the Ministry of Economic Development (MED) has published its annual SMEs Structure and Dynamics report.
That report again confirms New Zealand as a country of predominantly small businesses. Just over 96% of all firms have 19 or fewer employees, and about 87% employ five or fewer people. This preponderance of smaller firms is consistent across most industry sectors.
New Zealand's small and medium-sized enterprises (SMEs) make a significant contribution to the economy. They account for 37% of the country's output and nearly one-third of total employment (which rises to 42% if the self-employed are added-in). Smaller businesses are also the most dynamic group in the business population. The numbers of SMEs entering and exiting the market is high, but at the same time these businesses accounted for 60% of the new jobs created in the economy over the last four years. Research shows that high business turnover, or business churn, is associated with higher labour productivity.
SMEs typically show strong financial performance. For example, businesses with 1-5 employees have the highest average profit per employee of any group of businesses in New Zealand. They tend also to outperform their larger counterparts in average real sales and other income.
SMEs are critically important to regional and rural areas of New Zealand. In areas such as Northland, Tasman and the West Coast, SMEs account for a large proportion of employment.
Therefore, the importance to New Zealand of its SMEs cannot be over-emphasised.
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