A boom in businesses going bust
Photo:
RNZ / Yiting Lin
New Zealand is riding its highest wave of company liquidations in more than a decade, with thousands of businesses folding and countless livelihoods caught in the crossfire.
Many more are holding on, but just.
In the first half of this year alone, 1270 businesses have shut their doors - a 12 percent increase on this time year.
It's now anticipated that the total number of liquidations for the year will surpass 2024's 10-year high, when 2500 companies folded. That was an increase of nearly 700 compared to 2023.
The numbers have been soaring since the pandemic.
Deloitte partner Rob Campbell, who specialises in business restructuring, turnaround and cost transformation, tells
The Detail
the country "is getting closer to the peak but there is still a bit to play out".
"There is no sector that's immune, no business too big or too small to fail," he said. "And [the debt] can be as simple as a few thousand dollars through to several million dollars."
Newsroom business reporter Alice Peacock told The Detail that construction and hospitality are the worst-affected industries.
"Small businesses have been hit harder from what I have seen in liquidation lists ... I think that's because for that size of company, it's harder for them to recover those costs and move on financially.
"Probably what we are seeing hit the headlines doesn't fully represent what's actually happening.
"Hospitality businesses ... are consumer-facing, they are the company names that people know, so they're more likely to be reported on than the smaller, local, maybe family-run scaffolding companies or your local roofer."
One of those hospitality businesses is Auckland's Dragonboat Restaurant, which announced this week that it is going into liquidation.
Opened in the 1990s, it now owes at least 1.4 million dollars to creditors.
And it's these sorts of debts that can leave suppliers and subcontractors chasing unpaid invoices, triggering further closures, Campbell said. And this domino effect can be devastating.
"It also has flow-on impacts to affected suppliers; they're out of pocket, that impacts their own business," he said.
"They might be going through a period of stress as well, and the last thing they need is to, one, lose a customer and also have that customer not pay them as well.
"So it can have a bit of a spiral effect."
The cost of living crisis, rising unemployment, high interest rates, and a lingering Covid-19 impact are behind the increase in businesses folding.
"Some of this feels like it was playing out two or three years ago, and there is a real lag effect from when stress is first experienced by a business to when it may become ultimately insolvent," Campbell said.
But he and Peacock believe there is hope on the horizon.
"Businesses are closing down, but businesses are also opening up," Peacock said. "I was at a hospitality conference a couple of months back in Wellington, and there were some really amazing stories to come out of that.
"No-one was trying to pretend that it hadn't been a tough few years but there was one lead speaker who mentioned the number of liquidations but then was also trying to debunk a perception about the industry that it was all doom and gloom... and pointed to numbers that show... company incorporations, so those cafe and restaurant businesses that are opening, have also risen.
"I don't think anyone would say the economy is clearly in a recovery phase yet. But there definitely do seem to be signs that things are improving... people have been speaking of better times on the horizon."
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