The hospitality industry is expected to be the hardest hit by insolvencies over the coming year with a wave of insolvencies predicted over the next one to two years.
A survey of restructuring and insolvency experts has found 93 per cent expect insolvency appointments to rise over the next one to two years and 83 per cent expect a rise in the next 12 months.
Topping the list of industries where they expect to see a rise was hospitality with 90 per cent of those surveyed predicting a rise in that sector over the next year.
That was followed closed by tourism (88 per cent), retail (82 per cent) and accommodation (83 per cent).
John Fisk, chairman of the Restructuring Insolvency and Turnaround Association, said the impact of Covid hadn't started to come through into liquidations at the moment.
"A lot of the businesses going through a liquidation now were experiencing difficulties before Covid."
But he said based on workload expectations, company liquidations were likely to rise. Some of that would be a bounce back to dealing with the companies that have been able to survive through support, even though they probably shouldn't have, he said.
"There is an element of catch-up."
Fisk said insolvency statistics tended to be a lag indicator of what is going on in the economy.
"We haven't seen the number of collapses you would expect but I think [what] the survey is showing is there is an expectation that they are coming down the pipeline."
He said there was a sense that some of the stuff that was happening at the moment was too good to be true. "It will need to be addressed at some stage."
He pointed to the level of debt that many had taken on to get through the pandemic and lockdown periods.
More than 100,000 businesses have borrowed more than $1.7 billion through the small business loan scheme operated by the Inland Revenue.
Fisk also pointed to the IRD's annual report which showed 177,000 taxpayers have entered into instalment arrangements to pay overdue tax back over time.
"There is a lot of debt still being created out there and fundamentally debt has to be repaid and it doesn't matter what the interest rate is necessarily.
"Low interest rates help, particularly if you are only having to service interest but at the end of the day debt still needs to be repaid and there is an awful lot of debt that has been created out of this whole process. At some stage businesses will either have to be profitable enough to pay the debt back or they won't be able to."
The sectors facing higher expectations of insolvency are no surprise - hospitality, tourism and retail have all been at the forefront of being impacted by the lockdowns and by the country being shut to international tourists.
But Fisk said hospitality was likely to be at the leading edge because often those businesses did not have a lot of capital.
"It doesn't take a lot to set a restaurant up. So they are vulnerable. But also every time there is a change in alert levels it has an impact on their business."
He said for those in hospitality it was really disheartening every time the alert levels were raised.
"They have to keep staff employed and for the first two or three days all they are doing is throwing out their produce. The number of times you can do that is pretty limited particularly when you are undercapitalised.
"I think what people have been doing is trying to hang on but there is a limit to how long you can hang on. So the worry another lockdown will happen is obviously weighting on their minds."
He said the recent increase in the minimum wage also had a direct impact on a lot of those businesses.
"It is not just the person on the minimum wage that gets a rise - the expectation is everyone will need to have some sort of adjustment. That increases costs."
He said the rise in working from home arrangements also meant a lot of the central city cafes and bars were just not getting the same foot traffic that they used to.
"Business people meeting for lunch, they are not happening as often as they used to plus international tourists aren't coming in and spending money. They are the ones that will often buy the more expensive bottle of wine. All that has an impact on the performance of the business."
The transtasman bubble opens from Monday but Fisk said the jury was still out on whether that would stop some businesses from going to the wall.
"The first travellers are probably going to be friends and family and they tend to stay at someone's house. They are not going to stay in a hotel, not going to spend necessarily. Not going to spend money on tourist attractions.
"I'm not that optimistic about that having a big positive impact. What we gain from Australians coming here we will probably lose with Kiwis going to Australia."
He said the leisure tourism market coming over from Australia would be one to watch.
Fisk said the retail sector was facing disruption before Covid hit.
"I think covid has been good for a lot of retail businesses and some of the other industries our members are not expecting to see a lot of movement in - construction - [has] traditionally been fertile ground for insolvency practitioners. That reflects the nesting effect that Covid has had.
"The discretionary money that would have been spent on overseas holidays is instead being spent on improving property or buying a new car or wardrobe. All those things have really helped those businesses. Again how that will look in 12 months' time depends on borders opening and vaccine roll-out and what people choose to spend money on in the future."
The debt hibernation scheme comes to an end in October. More than half of those surveyed (53 per cent) said insolvency appointments would remain the same after the scheme ended. Just under 10 per cent thought they would significantly increase and 32 per cent said it would slightly increase.
Fisk said that was likely to be because few businesses had ended up using the scheme.