March was the worst month on record in terms of business collapses, a leading credit reporting agency says, as data once again shows construction sector businesses to be particularly exposed.
Over 1,200 Australian businesses faced external administration in March, according to the latest CreditorWatch Business Risk Index, released Wednesday.
That figure is several hundred businesses higher than in February, and comfortably above any other monthly Business Risk Index reading stretching to pre-pandemic 2019.
Those March figures differ from the latest raw numbers published by the Australian Securities and Investments Commission (ASIC).
CreditorWatch defines external administration as instances where a business entered administration, had liquidators appointed, or went into receivership.
Public ASIC data shows 1,053 businesses had a controller appointed, entered voluntary administration, or pursued a restructuring plan in the month to Sunday, March 24.
However, the trend is still clear, with earlier ASIC figures confirming a stunning spate of business collapses in February.
CreditorWatch CEO Patrick Coghlan said the new report, backdropped by what some commentators have labelled a ‘cost of doing business‘ crisis, is not surprising.
“Most businesses, particularly those that are consumer-facing, and therefore exposed to the vagaries of discretionary spending, are currently being hit by a range of heavy impacts,” he said in a statement.
“We don’t expect business conditions to improve markedly until consumer spending increases, and that is dependent on interest rate relief, which is not even on the horizon at this point given the high rates of inflation in the US.”
Construction sector businesses — which currently contribute a high proportion of monthly business collapses — are uniquely vulnerable due to their tax liabilities, CreditorWatch added.
The credit reporting agency holds 15,000 tax debt default records from the Australian Taxation Office, which refer to outstanding debts greater than $100,000.
Of that number, 23.8% are now held by businesses in the construction industry, almost double the percentage of professional, scientific and technical services businesses, the next-most represented industry category.
Many of those construction businesses are small subcontractors, with businesses focused on residential construction some 1.5 times more likely to default on a tax debt compared to other types of construction firm.
The report was not all negative, pointing to “outsized” growth in average B2B business invoices in March.
Those invoice sizes sailed past $200,000 for the first time since February 2023.
Even this figure comes with a caveat, however, with CreditorWatch saying it is still too early to observe a meaningful trend from last month’s bump.
“Given the very low average value of invoices we have recorded over the past year, we expect this figure to stabilise for the remainder of 2024,” the firm said in a statement.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
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