Company liquidations hit highest monthly level in a decade, Centrix says

Business credit defaults and liquidations are rising sharply, credit bureau Centrix says.

According to the latest monthly Centrix Credit Indicator, company liquidations rose 25% in September year-on-year, reaching 306. That's the highest monthly total in a decade. The previous biggest months for liquidations this year were March, when 238 were recorded, and 233 in May.

For the September quarter the biggest portion of liquidations came from the construction sector with 199, or 28%.

"Over the past year, property operators, residential building construction and cafes/takeaway food companies have been the most likely to be placed in liquidation," Centrix says.

"Looking at the hospitality sector, the last 12 months has seen a 34% increase in company liquidations from this sector, with cafes, coffee shops, restaurants, pubs, and clubs particularly badly hit."

It says hospitality businesses are more than two times more likely to fail than the typical New Zealand business. With more than 30,000 registered companies, hospitality businesses comprise 4% of all registered NZ companies.

Over the last 12 months there were 212 hospitality companies placed into liquidation, up from 158 for prior equivalent 12 months. Centrix says, however, hotels, accommodation, and catering services are showing small signs of improvement, with lower levels of credit defaults and company insolvencies in recent months.

Business credit defaults, meanwhile, are higher across the board, up 16% year-on-year.

"The transport industry is the worst affected, with credit defaults up 35% year-on-year, closely followed by the construction sector with credit defaults up 33%. The retail industry is faring the best out of the industries measured, with credit defaults up 3% year-on-year," says Centrix.

In terms of consumer debt arrears, Centrix says the number of people behind on payments dropped 3,000 month-on-month in September to 458,000. That's equates to 12.12% of the credit active population, is 3.5% higher year-on-year, and just above 2018 levels. The number of consumers with loans 30+ days past due is 156,000, of which 74,000 are 90+ days in arrears.

Mortgage arrears rose slightly in September, with 21,200 home loans - or 1.41% - past due. At 21,200, it's a 13% year-on-year increase, Centrix says.

Meanwhile, Centrix says 13,300 consumer accounts are reportedly in financial hardship. This data is provided to Centrix by banks, non-banks, telco and utility providers, with them notifying Centrix if one of their customers has been approved for financial hardship assistance.

"Although this [13,300] is a decrease of 400 in the last month, financial hardship cases overall have been rising since November 2022. Year-on-year the number of financial hardship accounts are up by 19%, although the rate of this growth is subsiding. Of these hardships, 47% relate to mortgage payment difficulties, 29% to credit card debt and 15% to personal loan repayments. The highest rates of financial hardship are observed close to the Auckland and Wellington main centres."

Centrix Managing Director Keith McLaughlin says arrears are expected to rise over summer, in-line with festive season spending and wider seasonal trends.

*The charts below come from Centrix.