Construction led the way with 90 business failures, followed by property and real estate, with 39 insolvency proceedings. Photo: 123RF
The number of business failures has jumped by more than a quarter from a year ago, according to a new report from an insolvency firm.
Data from Auckland-based BWA Insolvency shows there were 355 formal insolvency proceedings lodged in New Zealand in the three months ended March - a 28 percent increase from the 277 recorded for the same period in 2022.
Construction led the way with 90 business failures, followed by property and real estate, with 39 insolvency proceedings.
"Construction insolvencies were up 53 percent year-on-year and it's no surprise, really," BWA Insolvency founder Bryan Williams said.
He said businesses were feeling the pressure from various economic headwinds.
"It is inevitable as the impact of price increases and reduced demand start to bite. In the construction sector, you might need the money from project B to finish off project A, but if project C doesn't come in, the whole thing starts to fall over."
Many of the failed businesses would have already been facing issues for a number of years, Williams said.
"I think again that is a sign of the economic circumstances - and Covid - taking that one as an example. Then, there was a significant flush of money that came into the economy and that camouflaged the fundamentals that were potentially frail inside a business."
A rush of money at the time meant those issues were not of concern, he said.
Total insolvencies fell 22 percent compared to the final quarter of 2022, which Williams believed was mainly due to timing.
The retail sector saw a 21 percent jump in insolvencies compared to the first three months of 2022, while manufacturing recorded a 61 percent fall.
Business services also recorded a fall in insolvencies, down 42 percent.
Williams said the year-on-year increase was not surprising given the economic pressures, but he felt the economy did not fare as badly as he thought.
He said with inflation likely to have peaked, along with the Reserve Bank close to peak interest rates, and a likely boost to construction on the cards following the recent severe weather, he still expected insolvencies to rise this year.
"Companies that have held on by the skin of their teeth through the Covid era now confront the headwinds of anti-inflationary measures."