The Christchurch rebuilding effort and strength in the agriculture sector are underpinning expectations by more than 70% of South Island businesses that revenues will increase this year.
A survey in the Grant Thornton international business report showed 73.20% of South Island businesses expect an increase in revenue or turnover. That compares to 65.4% in the North Island.
Christchurch-based Grant Thornton partner Simon Carey said that, overall, 65% of southern businesses were ''very or slightly optimistic'' compared with 57.2% in the North Island.
The Christchurch rebuilding effort was a major factor in the growing confidence, he said in a statement yesterday.
''Last year, I think it's fair to say that many businesses have been watching from the sidelines as they wait for the city's blueprint to be finalised and the way cleared for rebuild activity,'' he said.
Mr Carey said while Christchurch's rebuilding would have a significant positive impact on the South Island economy for many years to come, the importance of the agricultural sector cannot be underestimated.
''Commodity prices remain strong and dairy numbers are growing,'' he said.
Last week's first GlobalDairyTrade auction for 2013, recovered losses from the tail-end of last year, with the price of dairy products rising 2%. The average winning trade-weighted price increased to US$3357 ($NZ4034) per metric tonne from US$3311 from the December 19 sale, APNZ reported.
Mr Carey said with large irrigation schemes, such as Central Plains Water, about to begin, the importance of agriculture in the South Island would continue to grow.
''Over $1 billion is earmarked for investment in irrigation in Canterbury alone over the next few years,'' he said.
Both South Island and North Island businesses expected profitability to increase, 64.90% and 67.30% respectively, while 26.80% and 24% think it will remain steady, he said.
Mr Carey said that confidence was reflected in the intention of 66% of South Island firms, North Island 51%, to increase investment in plant and machinery, while 47.40% in the south and 34.60% in the north were planning to increase their number of employees.
Mr Carey said almost half the businesses surveyed, 48.50%, did not expect the cost of finance to pose any constraint to expansion and another 19.60% saw it as a minor
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