KEY POINTS:
The predicted increase in company failures has arrived, with latest figures showing a sharp rise in liquidations during the September quarter.
The Ministry of Economic Development recorded 852 liquidations between July 1 and September 30, up from 667 in the same period last year - a rise of almost 28 per cent.
Until the last quarter liquidations had remained fairly stable - there were 2711 in the year to June 2008, and 2696 the previous year.
However, the commentators say with a contracting economy and the prospect of a global recession the rising number of failures is set to continue.
Ongoing fallout from the Blue Chip collapse contributed to the tally - the Registrar of Companies put 25 entities associated with the property investment scheme or its founders, Mark Bryers and Bob Bangerter, into liquidation in August.
Unsurprisingly, building construction and property development companies feature large on the list as the downturn in the property sector bites.
The collapse of Auckland developer Patrick Fontein's $750 million Kensington Park housing project in Orewa, and his Taupo development Huka Falls Resort, added 12 companies to the September total.
Auckland liquidator Gerry Rea said property sector failures were a direct result of problems in the finance sector. "The credit lines are cut off or are far more difficult to obtain."
He said there was a domino effect.
"I predict there will be a lot more."
BNZ chief economist Tony Alexander said there would be more failures across a range of sectors.
He said the rising number of liquidations was a lagging indicator.
"It shows what we already know - the economy's been in recession so you'd expect to see that happening."
Acting chief executive of the Registered Master Builders Federation, Chris Preston, said things were starting to get "pretty tough" in his sector.
He said smart building companies understood their cash flows and scaled down their businesses accordingly.
"Cash flow becomes the killer in the end."
His advice for struggling companies was to act early, and seek help.
"Talk to your accountant, talk to companies that specialise in helping people restructure."
LIQUIDATIONS
* There were 852 liquidations in the September quarter, almost 200 more than in the same period last year.
* Until now numbers of company failures have been fairly static, at around 2700 a year.
* But if current trends continue that number will rise sharply in 2008/2009.
BUILDER CAUGHT IN SQUEEZE
Christchurch police were called in August when frustrated sub-contractors, owed money by collapsed home builder Southern Homes, seized fittings from unfinished properties.
In his initial reports Henderson liquidator Bryan Williams has estimated that Southern Homes and its subsidiary Southern Homes Canterbury owe a total of $2.6 million.
He says it's unlikely unsecured creditors of the company will get anything.
Williams says the fundamentals of many companies, particularly in the building industry, are currently much more frail than they should be and they are not capable of weathering any storm.
He says that was true of Southern Homes.
Its costs exceeded the fixed price for development projects it was contractually bound to complete.
Shareholder funds propped it up for a time, but eventually that source of working capital was exhausted.
The professional liquidator believes more company failures are inevitable.
"I think we're into some very, very difficult times across the next 18 months or two years."
