New Zealand insolvencies rose in the third quarter, signalling continued strain on businesses despite early signs 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 the same time last year, BWA Insolvency principal Bryan Williams says the data reflects a “game of two halves” emerging across the economy.
Williams says several forward-looking indicators are improving, pointing to potential recovery momentum.
He says: “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.”
At the same time, significant pressure persists for firms dealing with legacy debt, rising costs and tighter credit.
Williams says: “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.”
Construction continues to account for the largest share of insolvencies, with 192 cases recorded in Q3, slightly down from 197 in Q2 and 215 a year earlier.
Williams says the numbers must be viewed in context given the size of the sector. He says: “Construction is a $17bn 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 notes a shift towards what he calls “healthy destruction”, with creditors accelerating the exit of firms that cannot recover.
Other sectors showing sharp increases include 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 says: “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 these challenges, Williams says optimism is returning. Building permits rose 7.2% in September, and ready-mix concrete demand is forecast to grow by more than 8% annually, providing strong leading indicators for renewed activity.
He says interest rate cuts and stabilising costs are boosting confidence about the upward phase of the cycle.
He also notes that external risks, including geopolitical tensions and trade uncertainty, remain potential headwinds but says New Zealand’s underlying economic capacity is strong.