By Shamubeel Eaqub, Chief Economist - Simplicity Research Hub


It’s hard to ignore how difficult the economic climate feels right now. Businesses are closing their doors, the headlines are grim, and indicators like the ANZ Bank’s Business Outlook survey show sales slowing again after a modest pickup. This recession is far from over.

So it's not surprising to see news of business closures, including a much-loved Timaru dessert maker which closed its doors just this week. The Companies Office Gazette continues to publish new receivership notices, and Centrix’s monthly updates paint a similar picture. The common theme is clear: trading conditions are tough, and many businesses aren’t making it through.

Closures vs. start-ups

Yet beneath those headlines is a less visible story. Over the year to July 2025, 71,500 businesses closed – but 78,400 new ones were started. That’s a net increase in business numbers during a recession.

The fastest growing industry? Hospitality! Business count is up 4%, even Auckland business count was up! Even Auckland saw growth in its business count, though Wellington recorded sharp declines.

This contrasts with the Global Financial Crisis (GFC), when the total number of businesses didn’t grow for years. Today, despite a deeper and longer downturn, some sectors are still expanding. It’s a reminder that while closures are painful and highly visible, new ventures are constantly emerging in the background. 

Shrinking firms, growing counts

So, what’s going on? Jobs data helps explain it. Businesses may be increasing in number, but they’re shrinking in size. Employers are shedding staff - especially young people, men, and full-time workers. On average, firms are getting smaller even as the overall enterprise count rises.

Does this mean there are still loads of “zombie businesses” out there? Enterprises that are technically alive but carrying unsustainable levels of debt or barely breaking even? Inland Revenue tax debt suggests we may yet see more failures, potentially the sting in the tail of this recession.

Figure 1: Consent issuance has stablized, but there are plenty of consented projects still to be built

What next?

There are no easy answers. Deeper interest-rate cuts and government finally pressing go on investment spending might just light the fuse of a recovery early next year. But global uncertainty, slowing net migration, and a drive for fiscal austerity could dampen that momentum.

For now, we’re left with a paradox: an economy in the doldrums, continued business closures, yet more new businesses being born than dying. It’s a reminder that the visible signals aren’t always the whole story.

This is Simplicity Research Hub’s independent expert commentary and thought leadership on economic trends and policies of interest to all New Zealanders. This content is our opinions and is provided for general information only. It does not relate to your particular financial situation or goals and is not financial advice or recommendations. Any external resources provided are accessed at your own risk and the Simplicity Research Hub takes no responsibility for third party content and does not approve, recommend, or endorse any external websites or the content they contain.