More businesses failing as Covid financial lifelines end - 'Costs are up, it's hard to find workers'

The number of business failures has risen markedly as Covid financial lifelines of government wage subsidies, and understanding banks have ended.

A quarterly report from BWA Insolvency showed a 43 percent increase in the past three months to 384 liquidations, with another 32 receiverships and voluntary administrations, based on Companies Office data.

BWA's founder Bryan Williams said economic and financial reality was catching up with more firms, which were succumbing to the harsher economic environment.

"Every industry has been affected by Covid in some way, but government handouts kept a number of companies trading that probably would have failed without that help.

"Now, they're on their own, and with Inland Revenue showing far less leniency, many businesses are fighting against some major commercial headwinds."

Williams said as the going got tougher, especially for businesses existing on slim or even no margins, he expected the number of failures to rise.

"We expect this trend to increase across the next three quarters as stiff headwinds overwhelm weakened companies."

The construction sector had the biggest number of insolvencies, accounting for more than a quarter of the quarterly total.

"Costs are up, it's hard to find workers, already narrow margins are getting vaporised, and material delays are causing friction costs."

The relatively low level of failures in hospitality probably reflected that many owners had walked out and turned the lights off, Williams said.

He said liquidations represented the "implosion choice" for businesses with no options and nowhere to go, but firms with some possibility of survival should take advice and look at possible voluntary administration, which ring fenced a company and gave breathing space for a possible reconstruction as agreed recently for ski operator Ruapehu Alpine Lifts.