Australian businesses failures on the rise

Australian businesses failures on the rise

The number of Australian business failures increased during the June quarter, despite a global trend to the reverse, new research shows.

Insolvency activity increased across nearly every local business sector during the period, a Dun & Bradstreet survey of around 30 economies worldwide shows. The retail and service segments were hardest hit.

The credit reporting and debt collection agency said Australian business failures grew 12.1% year-on-year during the quarter, after a 4.1% increase a quarter earlier.

Australia and Europe were the only markets to record a significant increase in business failures - across advanced economies, the global trend was a 5.7% decline.

Insolvencies in Australia were significantly worse than in the US and the UK during the quarter, and were on-par with debt-stricken European economies such as Italy and Spain.

Australia also joined eight European countries on the list of nations with a “sharply rising insolvency risk.” The report recommends that businesses in this category increase prices to cover this risk.

While the overall global improvement was led by an ongoing rebound in the manufacturing industry, the report states that the local sector has not been faring as well – business failures in Australian manufacturing have grown on average 60% since 2008.

Dun & Bradstreet CEO Christine Christian said the trend may reflect delayed, knock-on effects from the financial crisis, the strong Australian dollar and poor business sentiment outside of the mining segment.

Christian said that the knock-on effects are expected to tail off soon, but added that “overall confidence remains weak and this could lead to an increase in business failures going into 2012.”

Internationally, Christian said there is a growing danger that the economic slowdown will increase insolvency risks across the board towards the end of the year. “The global economic recovery is running out of steam,” she said.

Recent ASIC statistics show that nearly 1,000 Australian corporations entered voluntary administration in July.

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Tags voluntary administrationDun & Bradstreeteconomic indicatorsinsolvencies

More about Australian Securities & Investment CommissionBradstreetDun & Bradstreet (Aust)

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