‘Insolvency armageddon’: The number of collapsing companies is surging

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Australia is in the grip of an “insolvency armageddon”, with the number of failing businesses almost doubling in a year due to tough economic conditions and the withdrawal of government pandemic support.

CreditorWatch chief economist Anneke Thompson said the industry with the highest insolvency rate was food and beverage at 0.97 per cent. Construction, where many small-sized businesses were created during the pandemic, was at 0.7 per cent, up from about 0.4 per cent during the pandemic but not yet up to its pre-pandemic rate of 0.9 per cent.

“So there’s nervousness now in the market, and we are starting to take calls from businesses that have noticed a significant slowing in spending. And that is playing out in the viability of businesses.” “These business are now appearing in insolvency numbers due to more expensive inputs, higher interest rates and rising labour costs, as well as the absence of ongoing government handouts,” Coghlan said.Federal Treasurer Jim Chalmers said the government was determined to help small businesses with rising cost pressures.

McGrathNicol chairman Jason Preston, who has more than 20 years of restructuring and insolvency experience, said Australians needed to understand the reality of insolvency.“The attitude in Australia towards insolvency needs to change. To some extent, there’s quite a stigma towards insolvency,” Preston said.

Construction projects often involve a chain of developers, head contractors and subcontractors, with each of them looking to offload the risk of rising input costs and delays down the chain.He offered this advice to struggling businesses: “The first thing is not to put your head in the sand. Think in a clear way about what the environment looks like for your business over the next three to six months. Focus on cash management.”“Aged care is really going through challenges.

 

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