Wave of business failures expected as Covid-19 fall-out continues


There have been six public notices published in the Taranaki Daily News between March and early July advising of businesses being placed into liquidation. (File Photo)

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There have been six public notices published in the Taranaki Daily News between March and early July advising of businesses being placed into liquidation. (File Photo)

Business failures in the wake of Covid-19 are already happening in Taranaki, with the likelihood they will continue to rise into 2021.

Erin Gall, an associate of accountancy firm BDO Taranaki, said there were a few businesses in the region which had not come through the coronavirus lockdown in good shape.

“These may not have had a strong balance sheet going into the pandemic and so would not have had the reserves to see them through.”

Gall warned other businesses might not have experienced the full financial impacts as yet, as some had seen significant sales completed during the initial shifts through the alert level system.

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It was only now they had started to notice trade slowing down, when compared to what was going through the tills at the same time last year, she said.

Gall said she and her colleagues were working closely with clients and their bankers to plan beyond the next 12 months, as it was expected the full impact of Covid-19 might not be felt for some time, coupled with the uncertainty of what will happen globally.

There have been six public notices published in the Taranaki Daily News, between March and early July, advising of businesses being placed into liquidation.

The affected ventures include two construction-related firms, and those in the transport, energy and food production sectors.

MBIE says there are 15,520 firms in Taranaki, with 64 per cent of those run by people who are self-employed. (File Photo)

Simon O’Connor/Stuff

MBIE says there are 15,520 firms in Taranaki, with 64 per cent of those run by people who are self-employed. (File Photo)

A recent Stuff investigation found 73 companies which received support through the wage subsidy had gone into receivership or liquidation since it came into effect on March 17.

On its website, Restructuring, Insolvency and Turnaround Association New Zealand Inc chair John Fisk predicted 2021 would be a “watershed” year regarding the number of company failures.

He said while the wage subsidy scheme helped keep some businesses afloat, time would tell regarding their ongoing viability.

Fisk pointed to the Global Financial Crisis, which first hit in 2008, as a marker and said the worst effects of that were not felt until three years later.

He added the severity of company failures would be industry-dependent, with construction and tourism the likely losers.

Despite this, the ANZ NZ Business Outlook for July outlined a slight boost in business confidence, when compared to the previous month, but still painted a “dire” global picture and the uncertainty that created.

A net 26 per cent of respondents said they expected a dip in profits, while 15 per cent thought they would need to cut jobs, a marked improvement from last month, when 35 per cent of those surveyed believed employment would be on the line.

Recent results from a business survey carried out by Venture Taranaki follow some trends identified by ANZ.

While respondents found the Covid-19 impacts challenging, they were less pessimistic about the future.

Key concerns included the ongoing influence of the global pandemic on trade and the cost of buying materials.

But on the flip-side, respondents expected job retention to hold and were working towards the goal of recovery.

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