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John Fisk, national leader of restructuring for PwC and chair of the Restructuring Insolvency and Turnaround Association New Zealand, said insolvency applications had come down significantly under lockdown but massive amounts of government subsidies meant many businesses weren't addressing the underlying issues related to debt.
"What concerns me is that we have kicked the can down the road."
Applications for winding up businesses/liquidations rose to 93 in February before falling down to just 17 in April. They had since bounced back to 54 last month.
Fisk said apart from the wage subsidy most of the other allowances being made for businesses were debt related.
"IRD is going soft on you paying PAYE and GST - but it doesn't wipe the obligation - you just have to pay it later."
"And the same for your landlord - just because you didn't pay rent this month because you couldn't afford to doesn't wipe the debt you have to the landlord."
Fisk said those solutions had not addressed the problem that assumes businesses can get back up and running and generate sufficient cashflow that is enough to not only pay their current debt but historic debt as well.
"That is going to be a really big ask for some businesses."
Fisk said the Covid-19 lockdown had shown there were quite a lot of businesses that did not have a lot of resilience and were living month to month.
He said exactly when the increase in insolvencies hit and how severe would depend on the industry and cashflow situations of the individual businesses.
"If you are in food and IT - it probably won't hit that hard."
But he said construction and tourism could be the first industries to start feeling the pain from this summer followed by retail.
"Where is the pipeline of jobs in construction? An awful lot of construction relies on people having the confidence to build houses and when you have got increasing unemployment and concern whether your job is secure - that must mean there will be less construction."
Fisk said tourism was a "biggie".
"We are not going to see a big spike in numbers in tourism just yet because almost naturally they go into hibernation [over winter] but this summer if they have obligations they have to meet ... that is when we will see more issues."
Fisk said during the Global Financial Crisis banks reported that it took three years for the number of borrowers going into financial difficulty to peak.
But he expected the impact this time around to be much sharper and steeper.
"I think it is going to impact on so many more businesses."
Fisk said the big unknown was how severe it was going to be.
"I think we are in this freefall moment and this stage where there is enough money that is being pumped in - $11.9 billion from the wage subsidy - and the banks are being very open to changing covenants ... giving people deferments and there is quite a few businesses that have had headroom."
Many businesses had also seen a strong bounceback after the lockdown but he questioned how long this would last for.
He urged businesses to work out their turnaround plans now while there was some breathing room.