Receivers warn of problems ahead as screws tighten on failing Queensland businesses

Under pressure business owners will have no room to negotiate as creditors start turning the screws on struggling firms. See full list of Queensland company collapses over the past month.

The tide has turned for Queensland business in July as creditors start putting pressure on companies, according to an leading insolvency expert.

There were 69 liquidation or administration appointments in Queensland in July, according to data from the Australian Securities and Investments Commission. That was down from 76 in June and 79 in July last year.

Those businesses include the first company in Australia licensed to cultivate medicinal cannabis, Sunshine Coast-based Tikun Oceana, formerly known as Medifarm; swimwear retailer Blue Heaven Noosa; and popular Brisbane eatery Wing Fury.

Revive Financial head of business restructuring and insolvency Jarvis Archer said there was “no more room to negotiate” for many businesses.

“The tide has really started to turn for businesses this month. We’ve spoken to a number who have received statutory demands, winding up notices and ATO (Australian Tax Office) director penalty notices. They’re popping up everywhere and providing a real shock to directors,” he said.

“The problem for these businesses is that, once they get to this stage, the leniency they’ve experienced evaporates. The Court takes a legal view, and if a company can’t pay its debts and is insolvent it’s required to wind it up.”

There was “no more room to negotiate” for many businesses.

Mr Archer said the under pressure construction industry had a relatively steady July helped by

recent good weather which had allowed building work to progress and cash to start flowing again.

“However, we’re hearing about people who paid deposits to builders 18 months ago and construction still hasn’t started on their house,” he said.

“This indicates there is still some big problems around. Supply chain delays, increased freight costs and staffing are still all impacting the construction industry, so the question seems to be when, not if, we see more failures in this space.”

Mr Archer said there has been an increased take-up of the relatively new Small Business Restructuring Process.

He said for the 17 months since it commenced in January 2021, there had only been about 100 of these appointments. However, there were 60 in June and July indicating a great acceptance among under pressure business owners.

WCT Advisory managing partner Andrew Weatherley said insolvencies in the construction sector will continue to be high and the hospitality sector will continue to be challenged with the price of food and electricity plus staffing shortfalls impacting.

However, interest rate rises have yet to have a serious impact.

“I don’t think that interest rates have started to bite businesses yet, although they will continue with adding pressure as the continue (it seems) to increase. I think rates will have a greater impact on individuals who have high mortgages,” he said.

But the National Retail Association warned that the Reserve Bank’s fourth consecutive interest rate rise will likely devastate many small and family-owned businesses.

NRA chief executive Dominique Lamb. Picture: Liam Kidston

NRA chief executive Dominique Lamb said the decision to increase the cash rate target by 50 basis points is exacerbating business confidence, which is already at an all-time low.

“Retailers are struggling to keep their heads above water. This announcement to raise interest rates again directly impacts several businesses and their ability to repay loans,” she said.

“The retail sales figures for June showed just how much the sector has slowed down as consumers forgo spending on necessary items as much as they can to cover their growing mortgage repayments.”

Ms Lamb said the blow to businesses comes a week after the increase in annual inflation which hit 6.1 per cent.

“The cost of living crisis, escalating inflation and now a fourth interest rate hike shows policy makers do not have a good handle on how businesses are performing economically,” she said.

“The lack of clarity on how well Australians are actually placed to manage this change is exacerbating the uncertain economic environment for many struggling businesses.”