Business defaults in Auckland and Northland reflect lockdown distress -

Tuesday, 2 November 2021

Stuff Business Editor Susan Edmunds joins Minister for Small Business Stuart Nash to talk about how the small business sector is coping.

The prolonged regional lockdown is reflected in the number of struggling Auckland and Northland businesses failing to pay their bills.

According to credit reporting bureau Centrix, company credit defaults were up 3 per cent nationally for October, and the average amount owed was about $6000.

Centrix managing director Keith McLaughlin said many small businesses were continuing to feel the crunch from the ongoing lockdown in northern areas.

Defaults were up 18 per cent in Auckland and 13 per cent in Northland compared with the same period in 2019 before the pandemic struck.

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Sectors showing the highest defaults were rental and financial services, transport, agriculture and construction, while those doing better were public administration, mining, arts and recreation, education and training, and information services.

McLaughlin said demand for credit was more subdued in October and had flattened as Auckland’s lockdown was extended.

“We’ve also seen an increase in financial hardship, which has risen 15 per cent during lockdown, and jumped 8 per cent in just the last month.”

On the positive side, non-bank and car finance had rebounded to pre-lockdown levels and mortgage applications were up outside the Auckland region, and that could signal a post-lockdown recovery.

New mortgage lending was flat in August and September, possibly as a result of lockdown delaying settlement, and new credit card applications remained low compared to historical levels.

When Covid-19 restrictions eased slightly in early September McLaughlin said there was a big rise in credit demand and that soon translated into cash flow.

“You can see when an area goes from level 4 to level 3, there’s an immediate uplift in credit confidence and spending, and therefore money coming through the front door.

“As soon as Northland went to level 2 there was a 10 per cent surge in credit demand, and areas that have been out of lockdown for some time are almost back to where they were pre-Covid.”

Even when restrictions were dialled back in Auckland, McLaughlin said a distinct divide was likely to remain until full reopening was allowed.

“Take a mall, you might have 70 per cent of businesses that may be able to trade and 30 per cent that can’t.”