Wellington’s commercial sector is facing a severe downturn, with the capital now the only region in the country to have recorded a net fall in the number of active businesses over the past two years. The decline paints a stark picture of the economic pressures squeezing local enterprises, from tradespeople to cafes.
Statistics New Zealand data reveals that between November 2023 and February of this year, a net 1,578 companies disappeared from the Wellington region. This stands in sharp contrast to the rest of the country, where business numbers grew. During the same period, Auckland added a net 6432 companies, while Canterbury and Waikato saw net increases of 4083 and 1689 businesses, respectively.
The figures have ignited a political debate over the cause of the decline. Labour’s Wellington issues spokesperson, Ayesha Verrall, attributes the slump directly to the current Government’s policies, particularly the widespread cuts to the public service.
Economic roots run deep
However, the challenges facing Wellington’s economy are not new and extend beyond the recent public sector layoffs. Many businesses took on significant debt to navigate the closures and uncertainty of the Covid-19 pandemic. This was followed by a period of high inflation, driven in part by the rapid expansion of government spending during the pandemic response, which further squeezed profit margins.
Thousands of public service job losses have flowed on to impact local tradespeople, shops and cafes across the city. All up 10,000 jobs have been lost from the local economy.. These closures reflect a loss of opportunities for young Wellingtonians.
The construction and hospitality sectors, in particular, have borne the brunt of these sustained pressures. Iain Shepherd, an insolvency professional from BDO in Wellington, describes the current environment as exceptionally difficult. “Wellington is tough,” he says, noting the stark difference with other centres.
“There are no cranes in Wellington. I counted nine in Tauranga,” Shepherd remarked after a recent visit, highlighting the slowdown in major construction projects. This observation is supported by data from credit reporting bureau Centrix, which identifies hospitality and construction as the sectors most at risk of missed payments or business failure.
The human cost of failure
Behind the statistics are the personal stories of business owners who have lost everything. Earl van Haeren, former owner of Naenae-based Atco Steel Developments, saw his company collapse after decades of operation. The firm, which employed several dozen workers, was hit by a wave of project cancellations and postponements from which it could not recover.
“We felt like we never recovered from Covid. We were winning jobs competitively, and then some of the clients turned round and cancelled the jobs,” van Haeren says. The mounting debts and overwhelming stress led to a personal health crisis, including a heart attack and the breakdown of his marriage.
Reflecting on the experience, he believes he held on for too long, a common trait among passionate business owners fighting to save their livelihoods. The eventual collapse was “horrible,” but he has since found a new perspective. Now back on the tools and training his apprentice son, he shares a simple philosophy on survival: “As long as you are six feet above ground, not six feet under.”
A climate of uncertainty
The widespread stress on businesses is now being reflected in official company audits. A recent report from Chartered Accountants Australia New Zealand revealed that auditors are raising more “going concern” warnings for New Zealand companies than they did even during the peak of the pandemic. These warnings indicate a material uncertainty about a company's ability to continue operating in the foreseeable future.
Amir Ghandar, a reporting and assurance leader at the organisation, said the findings show how relentless economic headwinds can be just as damaging as a sudden shock. “Auditors are now flagging greater uncertainty than during the pandemic itself, which shows how sustained economic pressures around liquidity, refinancing and future profitability can be just as challenging for businesses as an acute shock,” Ghandar said. According to the report, 15% of New Zealand listed companies received such a warning in the latest analysis, an increase from 13% in 2021. While these figures only cover larger and listed entities, they serve as a barometer for the broader economic climate. The most affected sectors included consumer staples, health care, and information technology, where business models are often capital-intensive and exposed to volatile costs. This reflects a challenging difficult retail environment, though the effects appear most acute in the capital.
A path forward for the capital
Despite the grim figures, Wellington possesses foundational strengths that could pave its path to recovery. The city is known as a hub for technology and creativity, and its compact, connected CBD has historically fostered a collaborative business environment. This is a far cry from the boom times of the late 2000s when a thriving screen industry pumped hundreds of millions into the local economy, but the core infrastructure and talent remain.
Local business groups are not sitting idle. The Wellington Chamber of Commerce has put forward its 'Green Light for the Economy' vision, a strategic plan aimed at revitalising the region's commercial prospects. These local efforts are running parallel to global economic shifts, including geopolitical tensions and the transformative potential of artificial intelligence, which are forcing businesses everywhere to adapt.
While some external factors are beyond local control, the focus for many remains on resilience and recovery. The challenges are clear, encompassing everything from local government rates and infrastructure debates, such as the new tunnels plan, to navigating a tough economic climate similar to that seen in other cities like Hamilton. For now, the city’s business community remains focused on weathering the storm, embodying the same spirit of survival that has kept so many individual owners going.
