Just in case you missed my recent post about growing Australian business insolvencies or are still living on planet Bullhawk with the belief that everything is just fine and anyone complaining is simply a whinger, here comes Dun & Bradstreet with even more evidence to the contrary:
Australia has joined Europe as the only markets to record a significant increase in June quarter business failures, according to a report by credit agency Dun & Bradstreet.
According to the D&B Global Business Failures Report, Australia recorded a 12 per cent increase in business failures in the June quarter, despite insolvencies around the world falling to their lowest levels in nearly four years.
According to Dun & Bradstreet CEO, Christine Christian, business failures continue to fall globally despite the economic slowdown, however, Australia has joined the likes of Hungary, Ireland, Italy, Portugal and Spain with a sharply rising insolvency risk.
“The rise in insolvencies may have reflected knock-on, lagged effects of the 2008-09 global financial crisis as well as declines in business credit and relatively higher interest rates,” Ms Christian said.
“Outside the mining sector, sentiment is generally still poor and the strong Australian dollar is straining profits.”
The report found that in the June quarter:
- Business failures across advanced economies were down 5.7 per cent;
- Insolvencies decreased particularly strongly in emerging economies such as China and South Africa; and
- Euroland, along with Australia, was the only region to record an increase in business failures.
According to the D&B Global Insolvency Index (GII), the first rating of its kind to rank business failures in more than 30 key economies, Australia now sits 23 points higher than the United States, 30 points higher than the United Kingdom and on par with indebted Euro zone countries such as Italy, Spain and Hungary.
“Insolvency activity in Australia is up across almost all sectors with a significant deterioration in retail and service sector failures, reflecting subdued confidence,” Ms Christian said.
These findings correlate with recent ASIC statistics which showed that 2011 was shaping up as a record year for insolvencies. According to ASIC almost 1,000 corporations went into involuntary administration in July alone.
A rebound in the manufacturing sector, off the back of significant productivity improvements, has been a key driver behind the recovery in global business failures. Around the world, the number of business failures in the manufacturing sector fell more than 13 per cent year on year in the June quarter and by 15 per cent over the past four quarters. In contrast, business failures in Australian manufacturing have risen on average 60 per cent since 2008.
Services, construction, retail and manufacturing made up the majority of insolvencies in advanced economies during the June quarter. Service sector failures accounted for over one third of insolvencies and construction around a fifth. The performance of the services sector deteriorated compared with early 2011, with increased insolvency risk anticipated in light of the weak outlook for demand in the United States and Europe.
“There is an increasing risk that the global economic slowdown will intensify the upward trend in insolvency levels. The global economic recovery is running out of steam. Downside risks to growth, including debt crises in Europe and the United States and volatility in financial markets, remain high,” Ms Christian said.
“With growth expected to remain muted for the rest of the year, we are likely to see this further dent corporate profitability and payments performance, raising the risk of corporate insolvency.”
“Given relatively favourable macroeconomic conditions in Australia, we expect lagged bankruptcies from the slowdown in 2009 to tail off, however, overall confidence remains weak and this could lead to an increase in business failures going into 2012.”
DNB Global Business Failure-Sept11 UK