The 'most exposed' towns: The areas relying on a few businesses

High-profile closures of businesses that are major employers, such as meatworks in Timaru and mills in Ohakune, have shaken up a number of small communities in 2024.

But new data has shown there are many parts of the country that are heavily reliant on a small number of employers, and could potentially face a similar fate if conditions were to change.

Analysis by Simplicity chief economist Shamubeel Eaqub for RNZ looked at areas around the country where more than 10 percent of the population was employed by fewer than 10 businesses in an industry sector.

There were examples around the country.

Standouts includes South Waikato, where 23 percent of the population was employed by a relatively small number of businesses in manufacturing; Kawerau, where that number is 42 percent, Carterton, at 30 percent, and South Taranaki, where it is 35 percent.

In Buller, 15 percent of the population is in mining, and Southland has 36 percent employed in a small number of agriculture, forestry and fishing businesses, while Waimate is at 39 percent.

The Mackenzie District was heavily reliant on a small number of accommodation and food services businesses, reflecting the area's tourism.

Sectors such as manufacturing and agriculture tended to be some of the most heavily concentrated across the country, Eaqub said.

"Agriculture I'm a bit less concerned about, I don't think we are going to go to zero because New Zealand is bloody good at farming. It's just that we don't need a lot of people in farming and productivity gains mean the labour requirements are falling.

"There's a social problem in terms of do we have enough opportunities for these people if there was nothing else in the local community."

Manufacturing was a concern highlighted by the closures reported this year, he said.

As a sector, it has dropped from employing about 20 percent of the working age population in the 1960s to about 7 percent.

"Unemployment is increasing. but it has two parts: cyclical and structural.

"The cyclical job losses will come back when the economy turns. The structural losses, where industry shrinks, may not.

"This effect is more acute at a local level, especially in provincial New Zealand where there are fewer opportunities."

There were a number of townships that had built up around a single employer, he said.

"Often in isolated communities where there are not many other opportunities you have the thing of isolation, concentration and dependence… when circumstances change … it's great to have an anchor employer but without the anchor it can be unmoored and that's the challenge."

He said sometimes people could take work in another area, even while their home and family stayed in the same place.

"What I saw in the Hauraki District when the mine was closed after the slip was lots of those people went 30 minutes out of town to get a job somewhere else.

"It might not have been as good or as highly-paid but they had opportunities. If it's isolated it's much more troubling."

His analysis showed areas such as Ashburton, Chatham Islands, Central Otago, Ōtorohanga, Ōpōtiki, Nelson, and Kaipara had high proportions of people travelling for work.

Big cities would often find that new businesses shifted into the gaps left by those that failed, he said, but that was not necessarily the case in smaller communities.

Sometimes the skills required for certain roles would not be easily transferrable either.

"They can be specialized skills but it doesn't mean people are well equipped to go and work in some other job in some other town there's an element of requiring reskilling."

Those areas might need targeted assistance, he said.

"We know when these things happen the economic development plus social response need to work together.

"You won't be able to stop every business failing, many businesses fail every single day but what you can do is give people the skills and ability to move."

Infometrics chief executive Brad Olsen said this had been identified as an issue for some time.

There were also areas where there was heavy reliance on employers in education and training or public administration and healthcare.

Those were less of a concern because they tended to be driven by government spending decisions, Olsen said.

In 2019 it was estimated a third of Kawerau's economic activity came from the pulp and paper industry, Olsen said.

In some cases, it was hard to address the exposure easily.

Areas that were affected by a sector downturn, such as those with a heavy agriculture reliance, would find that the something that hit them hard would also affect the whole sector.

"If foot and mouth hit or there was a huge downturn in meat, it's going to affect some areas more but it's going to affect everywhere that has dairy or meat or whatever at that time."

In areas where a local event could affect an industry, such as Kaikōura's tourism industry being hurt by the area's earthquake, there was sometimes an opportunity to band together to look for solutions, Olsen said.

"If it's one plant, there's no ability for everyone to band together because the plant is on or off and if you've got an anchor employer and you've got an over-reliance or exposure in a certain industry, it's often because history has built up over a long period of time and it's difficult to move away from."

He said diversification would be something for areas to aim for over time but it would not be feasible for most to "fundamentally flip" a heavily reliant economy on its head to find a whole new industry.

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