Recent data shows that Auckland businesses are liquidating at a rate double that of other regions in New Zealand.
NZ credit bureau Centrix reveals a significant increase in business liquidations across New Zealand, with Auckland experiencing the sharpest rise. In the second quarter of 2024, Auckland recorded 383 liquidations, a stark contrast to 56 in Wellington, 118 in the rest of the North Island, and 61 in Canterbury.
Shamubeel Eaqub, an independent economist, has indicated that the economic situation in New Zealand is likely to worsen.
“This is an unusual recession; it’s a profit recession. We’ve seen a decline in profits, and we’re still seeing a decline in demand, so profits will fall further. We’re likely to see more pressure in the coming months before it gets better,” he said.
Meanwhile, Waterstone Insolvency’s Damien Grant suggests that the higher rate of business liquidations in Auckland compared to other regions could be attributed to Auckland’s more dynamic economy and higher number of start-ups. He also notes that migrants, who are more likely to start businesses, tend to settle in Auckland.
“Auckland is growing faster than other regions, so we’re going to see more businesses start in a faster-developing area and, as a consequence, more fail,” Grant stated.
Waterstone Insolvency said it had witnessed an increase in business failures, particularly in sectors like construction and hospitality, which are heavily reliant on disposable income.
Moreover, Centrix says the overall number of liquidations increased by 19% compared to the previous 12-month period.
“Looking at the property sector in particular, (the second quarter) saw the highest quarterly total of company liquidations—93—for over 10 years, with property company liquidations increasing by 28 percent within the last year. These figures indicate continuing weak consumer demand paired with a struggling New Zealand economy, which is hitting our businesses’ bottom line hard.”
Non-liquidation company closures were also running at 32% more than in 2023. Most businesses shutting down do not have debts large enough to force liquidation and instead close and cease trading to seek work at someone else’s business.