Pockets of relative positivity reported, but overall outlook subdued
Mid-market business leaders have a slightly more positive outlook than the general business population, with 58% feeling positive about their overall business performance in the last two weeks. In general, North Island business leaders (Auckland 42% and Rest of North Island 57%) are more positive about their overall business performance than their South Island counterparts (37%).
Not surprisingly, Agribusiness leaders (74%) are showing the strongest business performance sentiment off the back of recent favourable revenue from dairy, sheep & beef and kiwifruit produce – coupled with the lower NZ Dollar and interest rates.
Māori business sector leaders (64%) are the next most positive and typically show a correlation with Agribusiness sentiment trends in the BPI survey, likely due to their connection to aligned industries and regional economies often vested in agriculture, horticulture, fisheries and forestry.
Looking ahead to 2026, expectations remain subdued. Business leaders’ expectation of business performance sentiment in six months’ time is at a record low since reporting began in 2022, with 56% of business leaders nationally expecting to feel positive about this. However, as is typical, the forward view is slightly more optimistic than the present.
“The declining financial performance outlook aligns with what we are seeing in the market. With consumers tightening their belts and reducing discretionary spend, along with increasing unemployment, significant pressure continues to be felt in the retail, hospitality and tourism sectors. Businesses are cutting costs to weather the storm. We are seeing pervasive financial pressure across the building and property sector from suppliers to construction companies to developers, a lack of pipeline and demand is starting to bite.
For a number of businesses under financial pressure, the theme of ‘survive to 2025’ is quickly turning into ‘find a fix in 2026’. Businesses that can ride out these challenging times will emerge more agile and resilient and will be able to take advantage of improving economic conditions. With a big driver of our economy being consumer sentiment, businesses are hoping the recent OCR cuts will improve consumer confidence and drive an increase in discretionary spend.”
Rees Logan, BDO National Business Restructuring Leader
Sector insights: Tourism business leaders show largest decline in positivity
Business leaders in the tourism sector have experienced a record decline in overall business performance sentiment between six monthly surveys, falling by 29% since May. They are followed by retail business leaders who recorded a 10% drop. Just 40% of tourism business leaders feel positive about their business performance (lower than any other sector) and 48% of retail business leaders. These sectors continue to be impacted by the high cost of living and inflation on consumer demand, along with labour and skill shortages. Expected cruise ship passenger numbers for the coming season are down 20% on last summer, a similar decline to the previous year, impacted by high costs for operators. Tourism sector challenges may also be contributing towards the lower overall positivity recorded among South Island business leaders.
Business performance sentiment among construction business leaders remains at a low point nationally (49%) – the same as when last surveyed in April 2025. Construction is the only sector surveyed where expected future business performance sentiment (in 6 months’ time) is lower than it is currently (47%). While the latest survey was undertaken just prior to the recent OCR cut (50 basis points) on 8 October, this implies that conditions for construction business leaders will likely remain challenging for some time yet before they improve.
“The combined and continued impacts of a soft housing market, building slowdown (particularly in Auckland), along with restricted discretionary household expenditure, mean we are commonly seeing businesses engaged in related sectors face financial challenges – including retail, tourism & hospitality and construction.
Beyond newer entrants and smaller players, we are now seeing more entrenched, longstanding businesses feel the brunt of the challenging economic context. Our ray of light will come when we see more of these established businesses show confidence to hire and invest – signalling the economy has turned a corner. In the interim, those businesses which address a core market need, have a clear proposition, serve diverse markets and bring in fresh thinking to support robust planning, will more often demonstrate financial resilience.”
Kimberley Symon, BDO Advisory Partner
The top five issues for business leaders: Technology a concern in mid-market
The five factors which business leaders feel least positive about nationally reflect the challenging economic context, including; economic factors, cash flow, financial performance, political factors and business pipeline – the latter featuring in the top five for the first time.
There is some regional variation in these leading issues: Greater concern about workload among Auckland business leaders may reflect a reduced capacity to hire and limited access to skilled labour. North Island business leaders outside of Auckland are more concerned about cash flow. South Island business leaders are most concerned about business growth, but less concerned about their workload and political factors.
Interestingly, performance of systems and technology is a top five issue for mid-market businesses, but not the general business sector. This likely reflects the heightened importance of systems and technology as businesses gain scale, including future-proofing their systems to leverage AI opportunities.
“With heightened awareness of the business opportunities presented by AI, we’re seeing a growing focus among business leaders on ensuring their business systems are future-proofed to capitalise on these. As businesses grow, it’s typical to see them grapple with transitioning from disparate, manual systems to integrated technology platforms which bring both short and longer-term efficiencies. The businesses that make this transition most effectively, are typically those which are utilising advisers to navigate the sea of information and potential solutions to ensure they are selecting the best technology in line with their business goals.”
Carl Ferner, Partner, BDO Digital