More than 3,000 New Zealand companies entered insolvency during 2025 — the highest level in 15 years. But according to one of the country's leading insolvency practitioners, the economy is only part of the story.
eLocal Report: Based on the Notes From The Executive podcast featuring Damien Grant, Principal of Waterstone Insolvency, HERE.
Insolvencies Reach A 15-Year High
While the figures appear to reinforce concerns about the country's economic performance, Damien Grant says insolvency statistics alone do not tell the full story. According to Grant, business failures are influenced by a combination of economic conditions, government debt collection practices, business cycles and the natural realities of running a business.
Inland Revenue Is A Major Driver
One of the strongest messages from the interview is the role Inland Revenue now plays in company liquidations.
Grant says Inland Revenue remains New Zealand's largest creditor, with billions of dollars in outstanding tax debt. During the COVID years, tax enforcement eased considerably. As collection activity has resumed, many businesses carrying historical tax debt are now facing liquidation.
In his view, the recent increase in insolvencies reflects a significant change in debt recovery activity rather than economic weakness alone.
Construction, Hospitality And Retail Continue To Struggle
Grant identifies construction, hospitality and retail as the sectors currently under the greatest pressure.
Construction companies continue dealing with the legacy of fixed-price contracts signed before inflation surged, while hospitality and retail businesses are being squeezed by weaker consumer spending, higher living costs and reduced discretionary income.
Profitable Businesses Can Often Be Saved
Not every financially distressed business is beyond recovery.
Grant explains that many companies continue trading profitably but remain burdened by debt accumulated during difficult trading periods such as COVID. New Zealand's Companies Act provides several restructuring mechanisms that can allow viable businesses to continue operating.
He estimates that where a business remains fundamentally profitable, restructuring is often possible if owners seek professional advice early enough.
Waiting Too Long Can Become The Biggest Problem
One of the more insightful observations from the interview concerns the psychology of business ownership.
Grant believes many owners delay making difficult decisions because their personal identity becomes intertwined with the business they have spent years building. Closing or restructuring a company can therefore feel like losing part of themselves.
He encourages business owners to seek professional advice before financial pressures escalate beyond repair.
Risk Is Still Part Of Business
Despite spending two decades managing failed companies, Grant does not believe entrepreneurs should become risk-averse.
Instead, he argues successful businesses are built by taking calculated risks. The greater danger is failing to recognise when circumstances have changed and refusing to adapt accordingly.
Practical Advice For Business Owners
For businesses beginning to experience financial stress, Grant's advice is straightforward:
- Seek professional advice early.
- Don't ignore Inland Revenue correspondence.
- Understand that restructuring may be possible.
- Separate your personal identity from your business.
- If the business remains profitable, explore recovery options before considering liquidation.
Does This Affect New Zealand?
The current rise in business insolvencies is not simply a reflection of today's economic conditions. It is the culmination of several years of financial pressure that began during the COVID-19 period and has continued to build ever since.
Between 2020 and 2022, repeated government-imposed lockdowns and public health restrictions disrupted normal trading across much of the economy. While wage subsidies, business support packages and a measured approach to Inland Revenue debt enforcement helped many businesses survive, they also enabled a significant number of financially distressed companies to continue operating while accumulating tax liabilities and other debt.
From 2023 onwards, that environment changed rapidly. Inflation surged to levels not seen in decades, the Reserve Bank responded with successive interest rate increases, consumer spending weakened under growing cost-of-living pressures, and Inland Revenue resumed active enforcement of outstanding tax obligations. For many businesses already carrying debt accumulated during the COVID years, these pressures created a domino effect. Higher borrowing costs, declining revenue and renewed debt collection combined to expose financial weaknesses that had been building for several years.
The result is that today's insolvency figures represent more than a slowing economy. They reflect the unwinding of extraordinary support measures, the delayed consequences of the COVID period, and the realities of businesses attempting to recover while carrying legacy debt into a much tougher economic environment.
Understanding that broader context is essential. It helps explain why many business closures are occurring now, despite the underlying causes often stretching back several years, and highlights the importance of creating economic conditions that allow viable businesses to recover rather than simply survive.
Source
Podcast: Notes From The Executive
Guest: Damien Grant, Principal, Waterstone Insolvency
Host: PWRFULLY
Independent reporting. Original context. Credited sources.