Business closure rates 'were already increasing before lockdown'

Restaurant and bar owner Tony Crosbie talks about how lockdowns have affected his businesses.

Some parts of New Zealand went into the most recent lockdowns in a shakier economic state than might have been expected, new data suggests.

Dot Loves Data has prepared its latest resilience scores.

It said the national resilience level was still rated five out of five but there was variation around the country.

Across the country as a whole, there were 525,111 active businesses on August 1 this year. In the previous two months 7625 had opened and 11,696 had closed.

The Auckland region had a resilience score of five but its CBD rated only a three. Wellington’s central city was also rated a three, while Christchurch’s rated a four. Queenstown was also a four.

“The further you go from the city centre the more resilient it becomes - it is because people spend locally close to home and there is a higher concentration of businesses in the city centre,” said Dot Loves Data government director Justin Lester.

Kaikoura, Waimate, Opotiki and Westland all rated a two. The lockdown would be a kicker for those areas, he said.

Lester said it had seemed like the economy was in good shape before the latest lockdowns, with unemployment low and moves to increase interest rates. But the business closures showed that there were still many that were suffering.

Some had hoped a good summer would be enough to propel them through winter, but that had not been the case, he said.

The 11,696 was higher than recorded in the period of September to November last year, when the wage subsidy finished.

The further you get from the central city, the more resilient areas tend to be, Justin Lester says.
The further you get from the central city, the more resilient areas tend to be, Justin Lester says.

“It clearly shows that the impacts of Covid-19 are continuing to negatively affect businesses and those that have been clinging on are beginning to fall,” he said.

“It’s very uncommon for there to be more business closures than openings. That’s only really seen when we’re in a large-scale crisis or a deepening recession.

“We saw that last year when the wage subsidy came off – we thought it would be interesting to see where it went. It did come back up and most businesses cane back pretty well then it started to tick back down again.”

He said lockdowns had a compounding effect on businesses.

“They can only weather a storm for so long before they need time to recover. We anticipate the current lockdown will lead to a further spike in business closures over the next six-month period.”

The weakest sectors were professional services, manufacturing, education and training and arts, tourism and recreation.

The highest number of business closures was in Auckland, where 5511 closed. There were 1092 business closures in Wellington and 1352 in Canterbury. The 7625 new businesses was the lowest number for a quarter since January 2014.

There were 27 applications for liquidation in New Zealand in August and 20 applications for liquidation through to September 10.

“The liquidation process is often slow and will take several months before the full effect from this lockdown is known.”

Lester said there was a two-tier economy.

“A lot are doing really well. Others are grinding to a halt.”

Lester said regions tended to be more resilient than cities because they had the agricultural economy underpinning them.

“With the benefit of hindsight you wouldn’t put MIQ facilities in the middle of Auckland again. You’d use facilities elsewhere that are not in your largest city.”