Insolvency wave started at year end

The latest weekly insolvency statistics reveal 460 businesses wound up in administration in December.

The latest weekly insolvency statistics reveal 460 businesses wound up in administration in December. Picture: Supplied.

The latest weekly insolvency statistics reveal 460 businesses wound up in administration in December, well up on November numbers.

But the provisional data from the Australian Securities and Investments Commission reveals the December figures still came in well below their 2019 highs of 614.

Creditors voluntary winding up businesses accounted for the lion’s share of the administrations, at 308.

Only 306 businesses were dashed on the rocks of the COVID-19 economy in November, as the Victorian economy continued its slow climb out of its lockdown-hit slump.

The numbers are most severe in NSW and Victoria, where the shortfall is tracking at a wide gap.

The provision data shows 201 businesses in NSW went bust In December, down on the 227 for the same month in 2019.

The data shows a similar story where 135 businesses were dragged down by the Covid-ravaged economy that slammed the state for months.

Queensland, where Covid conditions have been far more mild than in other states, saw only 81 administrations for December.

The threat of zombie companies which have been enabled to continue trading thanks to debt protections has been pointed to by many as a consequence of the federal government’s actions.

The 12-month-rolling average data suggests the government’s debt protections have had their desired effect, with creditor’s wind-up and court ordered wind-up notices tracking far below their 2019 levels.

Only 754 businesses were ordered by the courts to close in 2020.

This was far down on the 2301 hit by court orders to cease trading.

The year to date data is equally ominous, with a 3,232 shortfall of businesses going bust compared to 2019.

But some appear to be facing the music.

The December close saw an unusual jump of insolvencies in the final week of the year, to 61 well up on the only 14 that went bust in the last week in 2019.

The December 31 deadline loomed large over the heads of many small and medium traders as the end of the road to the Australian government’s temporary debt protections.

Some financial commentators are expecting the administration and insolvency floodgates to open in the first months of 2020, with the latest ASIC data showing 42 businesses going bust since the New Year.

The expected flood is set to come after temporary debt protections were extended to six months from their pre-pandemic 21 day limit, preventing many businesses from facing the music that otherwise might.

The end of the JobKeeper wage support program, which has now been cut three times, leaves many businesses bearing more of the burden of paying their staff.