New Zealand recorded a rise in insolvencies during the third quarter, underscoring ongoing pressure on businesses despite early indicators of economic recovery.
The latest BWA Insolvency Quarterly Market Report shows total insolvencies climbed to 777 in Q3, up 5% from 738 in the previous quarter.
Although the figure is 6% lower than a year ago, BWA Insolvency principal Bryan Williams (pictured) described the results as reflecting a “game of two halves” in the economy.
Williams said forward-looking indicators such as rising share prices, improved real estate activity and stronger building permit numbers point to renewed confidence.
He said: “On one side, you’ve got irrepressible forward-looking indicators – share prices rising, real estate agents bouncing back, building permits up, and even ready-mix concrete demand forecasts improving.”
However, many firms remain weighed down by legacy debt, cost inflation and tighter credit.
Williams said: “But then there’s the other half: companies weighed down by cost inflation, credit tightening, and enforcement for unpaid taxes. For those burdened with debt that earnings can’t service, the future is bleak.”
The report shows construction remains the largest contributor to insolvency statistics, with 192 cases in Q3, slightly down from 197 in Q2 and 215 a year earlier.
Williams said the sector’s size and economic importance mean the raw numbers need context.
He said: “Construction is a $17 billion industry representing around 7% of GDP. It’s a large sector with many tributaries feeding thousands of families.
“Although it appears overrepresented in insolvency data, its failings are proportionally low compared to its economic weight, especially when you compare it to sectors like hospitality, which runs a close second in insolvency stakes but contributes far less to GDP.”
Williams also highlighted a shift in creditor behaviour. He said creditors were increasingly driving “healthy destruction” by accelerating the exit of firms unable to recover.
Broader sector data shows the steepest increases in insolvencies came from transport and delivery, up 29% from Q2 and 40% year-on-year; manufacturing, up 21% from Q2 and 37% year-on-year; and food and beverage, up 15% from Q2 and 27% year-on-year.
Williams said: “Transport operators are squeezed by fuel and compliance costs, manufacturers by input prices, and hospitality by discretionary spending patterns. These pressures are structural, not just cyclical.”
Despite the challenges, Williams said confidence is returning across the economy. Building permits were up 7.2% in September and ready-mix concrete demand is forecast to grow by more than 8% annually.
He said: “In the coming months, we expect a reversal of the recent contraction and new activity to become evident.” He added that New Zealand’s strong systems, technology infrastructure and “Kiwi ingenuity” could support a new phase of growth, while cautioning that geopolitical tensions and trade uncertainty remain external risks.