Company insolvencies and liquidations up, 474,000 people now behind on payments

Centrix managing director Keith McLaughlin said the cost of living crisis was enduring - and impacting multiple sectors. Photo / Supplied

By RNZ

High numbers of company insolvencies and liquidations point to extremely harsh trading conditions in construction, hospitality and retail, an expert says.

Data from credit bureau Centrix showed insolvencies jumped to 269 in May - up by more than 100 from the same month last year.

Company liquidations were up 22 percent year-on-year and were the highest level recorded in May for a decade.

Centrix managing director Keith McLaughlin said the cost of living crisis was enduring.

“When consumers are facing difficult circumstances they very quickly stop discretionary spending,” Keith McLaughlin said.

“By stopping their spending, things like retail, hospitality, building, construction, even new motor vehicles get put off or cancelled.

“That puts a lot of pressure on the business sector.”

South Island liquidations were up significantly year-on-year.

Over the first quarter there were 94 company liquidations in the South Island, up 47 percent on a year ago. That figure was largely driven by the Canterbury region.

There were 259 liquidations in Auckland over the same period, up 38 percent year-on-year, and 137 liquidations across the rest of the North Island.

Credit pain

The number of people falling behind on their mortgage and credit card payments increased, as arrears tracked 8.2 percent higher year-on-year.

Centrix data showed 474,000 people were behind on their payments in May, amounting to 12.64 percent of the credit active population.

That trumped the figure for April of 458,000.

“You see people starting to miss the first payment, that flows to 30 days, 60 days, 90 days and then serious default. We are starting to see that movement through the arrears programme,” McLaughlin said.

More than 170,000 consumers were 30-plus days past due, and 114,000 were 60-plus days in arrears.

On the other hand, the proportion of households behind on energy payments had slightly decreased.

And according to the data, financial hardships increased sharply by 25 percent on May 2023 to 13,000, with nearly half of those due to mortgage repayment difficulties.

The demand for credit continued to subside and non-mortgage lending was down year-on-year for the May quarter.

-RNZ