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NZ's economic flux means both upgrades and downgrades for NZ Inc: D&B

Tuesday 18th May 2010

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New Zealand’s business environment is clearly in a state of flux, prompting credit reporting agency Dun & Bradstreet to downgrade the risk profile of 9,000 companies while upgrading 10,500 firms.

In carrying out a risk profile revision for 20,000 companies in the first three months of the year, D&B predicts many firms are likely to experience financial distress over the coming year. Younger and smaller firms accounted for the greatest number of company downgrades, with the services, wholesale trade, manufacturing and retail trade sectors now being more likely to pay their trade accounts delinquently.

D&B’s general manager John Scott said the latest figures provide an important reminder to executives as many businesses underestimate the challenges an economic recovery presents.

“Although the past couple of years have been difficult, government stimulus measures and low interest rates encouraged households to spend and businesses to invest,” Scott said. “However, this silver lining is disappearing – interest rates are expected to begin rising in the near future and the government is winding back the stimulus.”

“In addition, credit remains tight and the risk aversion practices that financial institutions fine tuned during the crisis look set to continue throughout 2010," he said. "With these factors in mind, it is clear New Zealand’s executives need to maintain their risk management vigilance to ensure they don’t become another statistic on the failed business register.”

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