The number of retail businesses entering insolvency in New Zealand rose 74 per cent in Q2, from 39 to 68 cases, as financial pressure shifted from construction to retail, according to BWA Insolvency.
Total insolvency cases across the country increased from 755 to 760, up 3 per cent from the same period last year. Retail recorded the largest increase among all sectors.
BWA Insolvency principal Bryan Williams said the figures show that financial pressure is shifting rather than easing.
“Business stress has changed address,” he said. “Pressure has come off the building sites and landed on the shop floor. Retailers are competing for a limited pool of consumer dollars, and households remain cautious about discretionary spending. Weak sales volumes and operating costs are a difficult combination to trade through.”
Business services recorded the second-largest increase, from 74 to 87 cases. Accommodation, personal services, medical and care businesses also recorded increases during the quarter.
Construction cases fell from 207 to 169, while property and real estate declined from 76 to 62. Transport and delivery cases fell from 42 to 30. Despite the decline, construction remained the sector with the highest number of insolvency cases.
Recent volatility reflects market perceptions and underlying economic conditions. Geopolitical events will continue to drive short-term market volatility, while artificial intelligence, digital currencies and private investment are expected to drive longer-term changes for businesses.
“Shortages are impactful, but the real cause of change is the perception of what the future may bring,” Williams said.
He expects consumer conditions to improve in the second half of the year but said better sales may not be enough for businesses to address accumulated debt.
“Demand should lift as spring arrives, and Christmas will change the fortunes of some,” he said. “However, once the election is done, shades of austerity are likely as the fiscal deficit is addressed.”
For businesses with outstanding tax obligations to Inland Revenue, Williams advised seeking advice early rather than waiting for sales to improve. Better sales may not be enough to address years of accumulated obligations, while little may remain to restructure once liquidation becomes the only viable path.
