Who Will Survive the Next 18 Months?

Logan's argument comes down to one idea: the lag. The economy turns first and the casualties arrive later, a bit like feeling last night's rain in the river two days downstream. A few things cause the delay.

Firms eat their buffers first. Owners tip in their own savings, lean on suppliers, stretch the overdraft and quietly park the tax bill. From the outside everything looks fine right up until the cushion is gone. BDO notes that some businesses with models that had stopped working simply postponed the inevitable.

Tax debt is a slow fuse. Inland Revenue is the biggest petitioning creditor in court appointed insolvencies, according to Deloitte. Tax arrears have more than doubled to over $9 billion in five years, much of it built up during COVID when payments were deferred. Budget 2025 handed IRD an extra $35 million a year to go after it. Enforcement trails the original missed payment, so a firm that slipped behind two years ago can get tipped over today.

Cheap work is still being built. This one hits builders and subbies right where it hurts. BDO found 76 percent of firms have confirmed work for more than six months, which sounds comfortable. But 32 percent expect their margins to shrink over the next year, against only 23 percent who expect them to improve. Plenty of that work was priced tight to win it. If costs move after the number is locked in, a full order book can still bleed cash.

The pipeline has to be topped up. NZIER chief executive Jason Shoebridge points out in the report that current conditions make it harder to replenish work as projects finish. A strong book today can turn into a gap this time next year.

The cost squeeze hasn't let go

Sixty five percent of the leaders BDO surveyed named inflation as the biggest hit to profitability over the next 12 months, covering materials, fuel, energy and wages. Supply chains and interest rates were each named by 46 percent, and 71 percent expect fuel prices to hit their net profit.

BDO also quotes NZIER saying forecasts point to higher inflation over the coming year, which could nudge interest rates up and lean harder on firm profitability. Experian adds a warning light of its own. Its data showed payment performance getting worse again in the first four months of 2026 across several sectors that were already seeing high insolvency rates.