Insolvencies rose 12 per cent in November as Christmas looms as make-or-break for businesses

Insolvencies across Australia surged in November and many more firms are just hanging on hoping for a good Christmas sales period.

Company collapses across Australia surged 12 per cent in November as the Christmas sales period looms as a “real acid test” that will set the course for the business sector over the first few months of 2024.

Deloitte Australia lead partner of the Queensland Restructuring Services Richard Hughes said insolvency numbers have increased throughout the year and are 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 general 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.”

There were 586 liquidation or administration appointments nationally in November, according to preliminary data from the Australian Securities and Investments Commission, collated by The Australian.

That is just over 12 per cent more than the 523 recorded in November last year. The figures don’t include company collapses where no state was listed. There were 569 liquidation or administration appointments ­nationally in October,

NSW had the most collapses at 214 but that was down almost 18 per cent on the same time last year.

Company collapses increased in Victoria by more than 39 per cent and in Queensland by almost 19 per cent in November, compared to a year ago.

During November, Brisbane-based 365 Construction Services entered into voluntary liquidation and Sydney-based demolition and construction services company DB Group Global collapsed with administrators seeking a buyer.

Administrators have taken control of Victorian whiskey maker Ostra Distillers, amid talks with investors for a multimillion-dollar capital injection.

In Perth RPH Australia trading under the name GJ Gardner Perth West and Simsai Construction Group went onto voluntary liquidation.

The construction sector remains the leading sector for insolvencies.

Revive Financial head of business restructuring Jarvis Archer said Christmas 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 conditions.

“The cost-of-living difficulties are continuing to hit top-line 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.”

There were 586 liquidation or administration appointments nationally in November.

WCT Advisory Group consulting partner Andrew Weatherley said he was seeing more food services business seeking help or alternatively just moving to appoint a liquidator and closing down an the expected that to continue, especially when the 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 is at lower levels than in 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 also worried about what happens if that does not pan out."

There was a spike in personal insolvencies during the September quarter 2023 and there are expectations it will continue into the December quarter. According to the Australian Financial Security Advisory personal insolvencies across Australia rose 29 per cent compared to the same period a year ago.

There were also 374 personal insolvencies over the three months.