All time high for business insolvencies

Posted May 01, 2012 |

February was a bad month for small businesses, with 1,123 placed into administration, a number higher than any month previously recorded.

The data from the Australian Securities and Investments Commission showed February produced over double the amount of insolvencies as January, which had 518. This meant the month had the most insolvencies ever since the statistics began in 1999, and a record 449 of the cases ended up in court.

Executive director of the Council of Small Business Australia Peter Strong underlined the true gravity of the news.

“Insolvency is a person losing everything,” Strong said, “it’s not a good thing, it’s not just numbers on a page”.

He told Jeweller that the insolvencies were not unexpected, given the increased pressure retailers especially are facing.

“I’m not surprised,” Strong said. “It’s very difficult with wages still going up, landlords are still sticking up rent as well, and power bills are increasing.”

Strong predicts, however, that rents will soon stop increasing as landlords begin to realise how dire the situation is.

“There will be a re-alignment in how to do things to match the marketplace,” he said. “Landlords are going to need to decrease rent soon, because they’re cutting their own throats in the long run,” he said. “They need to decrease the rent because at the moment it makes no sense, sales are going down but rents continue to rise.”

Strong has higher hopes for online retailers, which will not be comforting to most of the Australian jewellery industry.

“If you’re a retailer online, unlike in a mall, you don’t have the same overheads or rent,” he said, “nor do you likely have a high wages bill, you can control power usage, and you’re generally in control of your own destiny.

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