Insolvency by the Numbers: NZ Insolvency Statistics March 2022

Economic recap

The March 2022 insolvency figures continue to be below past years. For the wider economy we saw inflation figures for the year to date at 6.9%. Slightly under what was expected from economists as a group but still well above the levels where they should be. The high inflation figures have led to an expected response from the Reserve Bank lifting Official Cash Rate (OCR) by 50 basis points in an effort to head off rising inflation.

From discussions with business owner on the coal face the cost of rising inflation, OCR raises, the rise in the minimum wage, increased sick days and introduction of new public holidays (Matariki) are a perfect storm of expenses that are unable to be absorbed by businesses. The owners are left with the option of price increases where possible or adjusting their business strategy and approach to deal with increasing costs.

Comparatively Xero has recently released their figures for SME’s with the SME index tracking up for the month of March 2022 and the debtor days dropping for collection all pointing to good signs for business. How this has been affected by the end of financial year tidy ups will be reflected in the upcoming April 2022 data.

As a country however we are heading into winter months after a 2nd lost summer of tourism, this will no doubt be tougher times for several industries. Along with China lockdowns causing further delays to shipping and supply lines. It is not yet clear sailing ahead for businesses in NZ. How reopened borders will play into this only time will tell.

Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations

March is one of the higher months for insolvency appointments being the end of the financial year, March 2022 unfortunately came in lower than all prior years. Not only were solvent appointments down but this was also reflected in IRD court liquidations with the full pressure seen prior to March 2020 yet to return to the vigour in which IRD has chased overdue debtors in the past.

Notable Appointments:

Auckland’s Poke Bars x3 Liquidated due to lockdowns and increasing cost of produce squeezing margins.

Insolvency by Industry

“Construction and Property Development” businesses continue to dominate their sector of appointments with “Financial and Insurance Services” (largely solvent appointments) and “Accommodation and Food Service” businesses making up 62% of total appointments for the month.

 

Winding Up Applications

By comparison winding up appointments for March 2022 were lower than the 2021 figures. Of note is that the drop is seen in the number of IRD winding up applications with non IRD applications only slightly down in the same period from 2021.

For the lower IRD applications is it likely that businesses are no longer racking up unpaid IRD debts? Have all the bad or dodgy operators suddenly changed their stripes and reformed their ways? This seems unlikely and it is more likely that the IRD is now sitting there with a growing list of delinquent debtors that they will have to do something about………eventually.

 

Personal Insolvencies – Bankruptcy, No Asset Procedure and Debt Repayment Orders.

While the total amount of personal insolvency appointment grows, they remain well below all prior March figures. The telling point for the year will be April where we see a dip in numbers or continued growth as we saw in 2019.

 

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