Why Qld businesses are struggling worse than in WWII and GFC
Business owners are drowning in financial conditions worse than in the world wars or the Global Financial Crisis – and experts believe the full scale of closures will not be known until next year once the “honeymoon phase” was over.
QLD Business
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EXPERTS have warned the full scale of small business closures will not be known until March next year as COVID crashes the economy.
It comes as businesses prepare for their toughest Christmas trading period yet, with many companies facing the prospect of bankruptcy after applying for large loans in a bid to help save crumbling businesses.
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Industry authorities say it is unknown how many businesses have closed due to COVID-19, however Queensland ranked as the insolvency capital of Australia after one in four companies were found to be going out of business before the virus even hit.
Small Business Association chief executive Anne Nalder said the situation was the worst the state and country had seen.
She said while a world war could devastate an economy, industries and trade were not entirely closed, as they are during COVID-19.
The full scale of closures would not be known until March next year, Ms Nalder said, once the “honeymoon phase” was over and the true extent of loans and superannuation withdrawal came to light.
“I think you’re going to find there will be a number of bankruptcies going on and that’s what I’m worried about,” she said.
“Instead of looking to being able to expand and put on staff … business owners will try and reduce debt and taking on employees is going to be a bit further down the track
“That’s not good for business because if you want to grow your business, you’ve got to put on more staff – it’s a vicious cycle.”
Chamber of Commerce and Industry Queensland general manager of advocacy and policy Amanda Rohan said four in ten businesses are relying on JobKeeper to sustain them.
She said recent data had showed business confidence is at the lowest levels on record in 20 years and worse than conditions during the GFC in 2009.
“It’s devastating when any business is forced to close … for many, it’s been their life’s work, and having that taken away not only takes away their livelihood, but also creates a huge amount of emotional distress, impacting them and those around them.”
Loud Events director Marianne Edmonds said the industry was in “dire” circumstances, as her business now operates at five per cent of what is was before COVID-19.
She said the financial struggle was worse than what the company endured during the GFC, with the industry unlikely to recover until the end of 2021, with suppliers facing bankruptcy.
“Before Job Keeper was even a thing we let staff go – we learnt during the GFC that the quicker we do that, the less the company bleeds,” she said.
“We’re exceptionally grateful for JobKeeper but for many of our suppliers it’s just delaying bankruptcy because at the end of the day it still doesn’t cover their overheads … their overhead costs are killing them.”
Ms Edmonds said the company was offered a $200,000 loan by the State Government but were fearful of going into further debt.