That's the key finding from the latest North Canterbury Business Opinion Survey published this month by Enterprise North Canterbury (ENC).
The survey found that 55 percent of companies surveyed reported decreased profitability, while only 13% saw an increase.
The resulting net -42% is the lowest since the survey began in 2013.
Research author Miles Dalton of ENC says the decline in profitability is no surprise given rising operating costs, rising interest rates and consumers' increasingly tight wallets.
The biggest concern for North Canterbury businesses at the moment is the rising cost of doing business.
Ninety-two percent of companies reported higher costs, and 57% of companies cited this as the biggest limiting factor when it comes to profitability.
Additionally, retailers have noted that consumers are being much more careful about where and when they spend their money.
Hamish Keen of CBK Craft Bar & Kitchen in Kaiapoi has noticed a noticeable change in recent months.
''We have certainly noticed a shift in consumer behavior as a result of these economic pressures.
''With rising interest rates and inflation, it is understandable that customers are becoming more financially cautious.
''For small and medium-sized businesses like ours, it's about balancing the need to manage the rising costs of goods and labor without unduly burdening our customers.
''It's a delicate balance to maintain affordability whilst ensuring we can still deliver the quality and service our customers expect,'' Mr Keen said.
CBK Kaiapoi is one of a number of CBK stores nationwide operating under the CBK Group. CBK Group CEO Dan Roos says the current pressures on businesses are visible across the country.
''From Paihia to Dunedin, we have seen notable shifts in business dynamics across the country,'' Mr Roos said. Rising costs impacting various aspects of our operations highlight the need for strategic business management.
''The hospitality industry is known for its thin margins, and the current economic climate requires exceptional management skills to maintain profitability.
“A major ongoing challenge for restaurants and bars is rising labor costs. It is essential that businesses remain vigilant and flexible and ensure that labor costs are commensurate with their variable turnover, which can fluctuate significantly.”
Despite the profitability issues, North Canterbury businesses remain generally positive about the future. The research shows that local businesses are more confident about the future of their business situation compared to a year ago (+29%), and 48% more confident about the business situation in New Zealand.
Businesses across the country are also showing a rise in business confidence compared to this time last year.”
Mr Keen attributes this to an optimistic attitude.
''I believe that entrepreneurs are naturally positive individuals, driven by the desire to succeed for their teams and their customers.
“Overall, I think the increased confidence among local entrepreneurs is a reflection of resilience and adaptability. “We recognize that by innovating and focusing on customer satisfaction, we can navigate through difficult times and emerge stronger,” he said.
“This mentality fuels our optimism about the business environment in the coming months.”
The survey, conducted every six months, includes responses from businesses in both the Waimakariri and Hurunui districts across a range of sectors.
In addition to statistics on profitability, cost of doing business and business confidence, the survey also includes data on North Canterbury employment trends, investment and environmental sustainability.
- The full survey results can be viewed online at enterprisenorthcanterbury.co.nz/invest/surveys-and-reports/