Sunday, October 13
4MQEHZF copyright image 235937

As liquidation numbers soar, businesses ‘can’t hang on’


Sign that reads 'Sorry, We are closed' hanging in a shop front in Central Auckland during Lockdown Level 3.

Photo: RNZ / Cole Eastham-Farrelly

Retailer members of her organisation are closing their businesses every week, chief executive of Retail NZ Carolyn Young says.

“It’s incredibly tough,” she said. “Part of it is like the culminating factor – businesses hang on, hang on, hang on – April through to September are quieter months in retail.

“We’ve come off eight quarters in a row of negative growth, at some point businesses are going to run out of cash. They’ve used all their lines of credit, they can’t stay open any more. Sometimes it’s their choice, sometimes it’s forced on them.”

Data from Centrix shows the number of retail businesses being liquidated was up 36 percent in July, compared to the same time a year earlier.

Hospitality liquidations were up 27 percent and were 2.2 times more likely to be liquidated than businesses as a whole.

Transport liquidations were up 35 percent and construction 9 percent.

Young said she had seen a surge in members closing their businesses this year.

She said she hoped the “survive til 25” mantra proved true and things would improve next year, but it could be a gradual process.

“So many businesses actually can’t ‘survive til 25’, that’s the real factor here.”

Small businesses were harder hit because they could not trim their operations to reduce costs in the same way that bigger organisations might.

“Small businesses have to close completely when they can’t survive – that’s not just their job but their income that pays everything… if you’re a SME and you’ve had to close because you can’t make your business viable, at the same time as you’ve got higher mortgage rates, pressures at home and pressure at work, that’s incredibly difficult to navigate through.”

Data on Tuesday showed retail activity fell by 1.2 percent for the June quarter.

Young said a change in consumer confidence would be critical.

Retail NZ’s recent Retail Radar quarterly survey which showed that 71 percent of members failed to meet sales targets last quarter and 42 percent of retailers were uncertain whether they could survive the next 12 months.

Meanwhile, insolvency firm BWA’s report for the second quarter of the year showed 700 insolvencies, the highest in a single quarter since 2016.

There was a 23 percent increase from the previous quarter.

That data showed a drop in retail insolvencies compared to the same time a year earlier.

BNZ chief economist Mike Jones said some sectors were being hit harder than others as the slowdown deepened and spread.

“But just about every sector has been relatively heavily impacted.”

He said business failures tended to lag economic cycles so the numbers could get worse before they improved.

“We’re still looking at an uncomfortable six to nine months for the economy.”



Source link