More than 2700 businesses bust

Claire Heaney
February 22, 2012
Herald Sun

MORE than 2700 small businesses went broke in the three months to Christmas, new research has revealed.

And with the global economy struggling and confidence flagging, many more failures are likely, credit reporting agency Dun & Bradstreet says.

The number of small businesses declaring bankruptcy nationally surged 48 per cent in 2011.

While the group does not release state-based figures, it said the failure rate in Victoria climbed 35 per cent during the year.
Not only were businesses folding at a rapid pace nationally, fewer businesses were launching, with start-up numbers down by 95 per cent.

Despite the bleak figures, the Dun & Bradstreet analysis provided some cause for optimism.

It said business collapses for the December quarter were up from 1925 in 2010, but down 10 per cent on the September quarter.

Dun & Bradstreet chief executive officer Christine Christian said the number of businesses failing had grown by more than 30 per cent over the past three years.

“There is an increasing risk that the global economic slowdown will intensify the upward trend in insolvencies,” she said.
She said the consecutive interest rate cuts late last year had failed to lift confidence.

“This is obviously one of the side effects of long-standing global uncertainty and can often be enough to deter businesses from entering the market, irrespective of actual conditions,” she said.

The most vulnerable small businesses were in the services, finance and construction sectors.

Dun & Bradstreet’s research came as the latest Australian Chamber of Commerce and Industry small business survey found businesses continued to lack confidence.

Based on a survey of 1700 businesses nationally, the group’s index measuring expected economic performance – asking businesses how they expected to fare over the next year – was down for the eighth successive month.

Wage and non-wage costs continued to be a burden and businesses said the strong Australian dollar had led to import competition.

ACCI economics and policy industry director Greg Evans said small businesses were pessimistic about future trading conditions.

“The current economic backdrop is sapping confidence,” he said.

“European instability, uncertainty about the direction of interest rates, the upcoming carbon tax impost and weak demand conditions across many of the sectors” were undermining confidence.

Mr Evans said a quick turnaround in fortunes was unlikely, but tax cuts would help.