CreditorWatch warns that a rise in business failures is a certainty as warning signs flash
A spike in insolvencies, payment defaults and a greater number of at-risk industries leaves parts of Australia in store for a near-certain business crunch within 12 months, says CreditorWatch.
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Western Sydney is heading for an insolvency crunch in the coming 12 months, according to business analysts at CreditorWatch which warned that all of its data predicted an increase in business failures.
CreditorWatch said its datasets were flashing warnings that more business failures were coming despite high work volumes and low unemployment.
An increase in external administrations of businesses – up 35 per cent from levels recorded last year – alongside a 22 per cent lift in court actions were both pointed to by CreditorWatch.
CreditorWatch chief executive Patrick Coghlan said there were encouraging signs of economic activity, but that challenges were still pressuring businesses.
“From a pandemic to labour shortages, supply chain disruptions, high inflation and rising interest rates, Australian businesses have had it all thrown at them,” he said.
“We can’t ignore the forecasts for more tough times ahead as demand drops and cost pressures remain.”
CreditorWatch said its data showed Western Sydney was the highest at-risk area in Australia for business failures due to its low median income, and high concentration of people and workers in vulnerable industries. These include construction, transportation, postal and warehousing services.
CreditorWatch said inflationary conditions were leading businesses to increasingly struggle with costs.
This has resulted in business-to-business trade payment defaults lifting 20 per cent in the year after a seasonal dip in December and January.
CreditorWatch chief economist Anneke Thompson said the construction industry was experiencing very high rates of work, but struggling with cost issues.
“It is the cost side that is really damaging to this sector at the moment, with many projects being completed at a substantial financial loss to the builder due to the price the owner pays being fixed at the time of contract signing,” she said.
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Originally published as CreditorWatch warns that a rise in business failures is a certainty as warning signs flash
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