It’s no secret there has been a “massive rise” in Australian companies collapsing but new findings show they have skyrocketed by a whopping 50 per cent since April.
The construction industry has faced a particular crisis with dozens of firms going under this year, but everything from billion dollar tech starts up to grocery delivery companies have become casualties of this “disturbing trend”.
Overall, companies going into external administration are up 46 per cent year-on-year, while court actions are up 54 per cent year-on-year, the latest data from credit reporting agency CreditorWatch found.
The huge jump has been blamed on interest rate rises causing “cheap money” to dry up, while spooked investors are pulling back on spending their cash on start-ups as valuations have taken a dramatic dive, with a slew of staff cuts battering the sector.
CreditorWatch has issued a chilling warning that the rise in business insolvencies will continue this year as multiple impacts batter the economy including ongoing supply chain issues, declining consumer confidence, rising interest rates, inflation and labour shortages.
“With business and consumer confidence declining and inflation and interest rates on the rise, this doesn’t bode well for businesses, particularly small and medium enterprises whose cash reserves were depleted during the pandemic and are now operating on much tighter margins.”
“Start-up businesses or those in the growth phase are always deemed riskier. We have already seen this phenomenon hit the tech sector, and many well-known companies are being repriced to reflect this.”