Illawarra businesses are turning to buy-now, pay-later platforms and seeing margins squeeze as consumers tighten their belts and cost pressures increase.
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Wynter Dares, CEO of Wollongong Foot and Ankle Centre, said while it wasn't all doom and gloom, there were challenges ahead.
"Our margins to a certain extent are getting squeezed, and everything's going up, utilities are going up, medical consumables are going up," he said.
Across the Illawarra, businesses are forecasting more challenging conditions towards the end of 2022.
According to the Business Confidence survey from Business NSW, Illawarra businesses rated their confidence in the current quarter at -54.8 and their confidence in the next quarter at -64.5.
While this was an improvement on the previous quarter, when Illawarra businesses were the least confident in the state, Business Illawarra executive director Adam Zarth said there were few bright spots in the lead up to Christmas.
"It is very concerning that local businesses here in the Illawarra are bracing themselves for a challenging December Quarter, with business conditions expected to deteriorate," he said.
"Businesses don't think things will get better during the Christmas period - they think conditions will get worse, which is quite unusual for this time of the year when optimism usually builds in a visitor region like ours."
While Mr Dares's business is not as tied to consumer cycles as retailers and accommodation businesses, he said he is seeing the effects of consumers cutting back on their spending.
"We put an Afterpay system in place a couple of months ago, just to provide some short term cash relief if people are struggling."
Mr Zarth said that nationwide trends were impacting spending at a local level.
""This pessimism for the future clearly demonstrates the collective impact of the cost-of living crunch that is sweeping the nation due to rising interest rates, cyber security risks and interruptions and energy cost increases of up to 20 percent with another 30 percent forecasted for next year."
In the Illawarra, businesses were least confident in their ability to cope with operating cost pressures and were not confident about capital spending, signalling as margins tighten, businesses were less likely to invest.
Illawarra businesses were the least confident in capital spending for any region across the state, suggesting major capital intensive programs expected to be rolled out in the region in the near future, such as the BlueScope blast furnace reline and the WIN Grand redevelopment were not yet inspiring confidence at a local level.
Mr Zarth said the results showed governments at a state and federal level should continue to look at ways to boost confidence.
"It is important from here that governments, federal and state, press on with skills and tax reforms, look at ways of providing additional support to business during energy transition and provide more investment in innovation and a coordinated state-federal productivity agenda."
Mr Dares said the mood in businesses was one of watch and see.
"Everyone is a bit nervous at the moment."
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