National businesses down with closures exceeding start-ups

Monday November 05, 2012 Dr Amapola Generosa

The latest New Zealand Business Demography Statistics revealed that the number of businesses in New Zealand at February 2012 were down 0.8% to 469,120 from year earlier levels.

The number of businesses decreased across all regions, except in Wellington. The largest drop was in the Northland region, with total number of businesses falling by 2% from previous year level.

Compared to February 2011, business closures exceeded business start-ups. Business closures were up 2.3% from the previous year, with 47,944 businesses closing at February 2012. However, 92% of these closures were by non-employing enterprises. While there were more closures based on year-on-year change, the 47,944 businesses closing in 2012 was less than the peak of closures in 2010 of 53,500

Despite our stalling economy, it appears that businesses are becoming more resilient. The businesses in the agriculture, forestry and fishing, and information media and telecommunications had lower closures compared with February 2011. Businesses that had significant closures were in the professional, scientific and technical (453 businesses), accommodation and food (216 businesses) services and construction (171 businesses) industries.



Line graph displaying the change in number of start ups and closures 2003 - 2012


As the chart above shows, start-ups had been declining at an average of 1,200 enterprises per annum since 2003. Based on the latest business demography statistics, start-up rate is now down to 9% from a high of 16% in 2004. Among the industries with significant decrease in the number of start-ups were those in the service industries such as financial and insurance, real estate and professional, scientific and technical services.

In total, the number of business start-ups fell by 11.8%, with 40,688 start-ups at February 2012. Of the start-ups, over 35,000 (86%) were non-employing enterprises.



Line graph showing changes in employment in start ups and closures 2003 - 2012


These trends paint a concerning scenario, as lower economic activities will lead to lower employment As the chart above shows, the total employee count in business start-ups had also been declining, though above employment losses due to business closures. Employee count in start-ups has plateaued at about 21,000 in the last three years. While this trend suggests that employment creation in business start- ups has weakened, it should be noted that most start-ups were non-employment businesses.