Insolvencies rose 19 per cent in November as Christmas looms as make-or-break for businesses

The Christmas period will be make-or-break for thousands of Queensland businesses with insolvency experts saying how consumers react to cost-of-living pressures will set the scene for 2024. SEE THE LIST

Queensland insolvencies surged almost 19 per cent in November as the Christmas sales period looms as a “real acid test” for the first few months of 2024.

Deloitte Australia lead partner of the Queensland Restructuring Services Richard Hughes said insolvency numbers have been increasing throughout the year and returning to pre-Covid levels.

“I think next year will be very interesting, especially when the Christmas bills come in. It will be a be the real acid test on how the economy shapes up,” he said.

“Cost of living and generally consumer confidence will be issues and if the Christmas sales period is a little bit off it will be very interesting at the start of 2024.”

In November there were 101 liquidation or administration appointments in Queensland, according to preliminary data from the Australian Securities and Investments Commission.

That was almost 19 per cent more than the 85 recorded in October this year. There were also 85 collapses notched up in November last year.

During November 365 Construction Services in Morningside, Brisbane, entered into voluntary liquidation. Other companies that went under were First things First Therapeutic massage centre – formerly trading as The Beauty & Body Bar and Burger Box Pty Ltd trading as Getta Burger Ashgrove and Getta Burger Underwood.

WCT Advisory Group consulting partner Andrew Weatherley said construction, and accommodation and food services were on par in terms of total insolvency numbers.

“We’re seeing far more food services business seeking help or alternatively just moving to appoint a liquidator and closing down, and we expect that to continue,” he said.

Mr Weatherley said there will be substantial pressure on the food industry once the busy, Christmas trading period ends.

“We have several potential engagements whereby cafe and bar owners are looking to trade through the next few weeks and then close or liquidate around/just after Christmas, when the whole industry slows down,” he said.

“At the moment, there seems to a general positive feel in those industries, but I expect spending to be at lower levels than 2022 given the increase in cost of living and interest rates.

“I will be very interested in seeing the outcome of retail sales numbers this year, and I suspect a lot of businesses are crossing their fingers for a great next few weeks but are also worried about what happens if that does not pan out."

Construction remains one of the major sectors for insolvencies.

Revive Financial head of business restructuring Jarvis Archer said the Christmas period won’t be easy for business owners.
“The Australian Tax Office (ATO) has been delivering early Christmas gifts in the form of director penalty notices and statutory demands expiring the week before Christmas,” he said.

“As well as the difficulties for those being targeted by the ATO, it also creates practical difficulties for us as restructuring and insolvency professionals, and the already stretched ATO staff who will need to deal with increased responses to deadlines falling over the Christmas break.

“We’re particularly seeing companies seeking to commence small business restructuring engagements before Christmas due to ATO action. This is a sign that business owners are hopeful that their business will be able to survive once reducing their ATO and other debts to an affordable level.”

Mr Archer said businesses were laying off staff due to the difficult trading environment businesses are to continuing to experience.

“The cost-of-living difficulties are continuing to hit topline revenue, causing cost-cutting to match,” he said.

“Naturally, it’s terrible for staff to face unemployment just before Christmas, but business owners have limited options when there’s no prospect of trading improving anytime soon.