New Zealand business liquidations rise again as companies default on debt – Centrix



More and more businesses in New Zealand are facing liquidations as companies default on their debt. Photo / 123rf

New data shows a sharp increase in business closings in the three months to June, with defaults rising 6 percent, although the overall business environment remains positive.

The latest data released by New Zealand credit bureau Centrix revealed that business liquidations rose 8% between April and June in New Zealand.

The increase in closures appears to have been voluntary, Centrix said, with data from the Companies Office showing liquidations have declined by 33% in the past year.

Despite this, the general business environment remains positive, with new company registrations remaining solid, up 5%.

Centrix Group CEO Keith McLaughlin said the reason for each shutdown would be unique to individual circumstances. It is no coincidence that, over the same period, corporate defaults increased by 6%.

McLaughlin said that over the past 12 months the default has increased quite dramatically and he expects the trend to continue over the next few months.

“In the June quarter up to 1700, with an average default of around $ 4000,” he said.

“I would expect the defaults to be even higher in a month,” he said.

Many small businesses were having cash flow issues and that was a clear warning sign that some of them would not survive.

McLaughlin said the steps the company should take are to pay off the overdue debt rather than create new sales.

“So if I can’t pay this month and if I can’t pay last month, next month I have three months to pay, so it becomes cumulative over a period of time.

“It’s a harbinger that people really should start watching what’s going on,” he said.

Although unlike the corporate sector, the credit market was “quite good from a personal point of view,” he said.

The Centrix report this month revealed a continuation of the recent downward trajectory in the average credit rating, with the average credit rating standing at 640, the lowest this year.

“This is likely the result of a cooling housing market, which has resulted in fewer mortgage applications, combined with increased demand for personal loans and credit cards over the past month,” the report revealed. .

Non-mortgage consumer loans had fallen from their record high in May – down 17% month-over-month, including new mortgages down 4%.

But it remained up a “staggering” $ 2 billion year-on-year and demand for new credit cards is increasing but still down 30% from pre-Covid levels.

“Personal loan applications are also at their highest level for the year, as a growing number of consumers turn to unsecured finance,” Centrix said.

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