Liquidators are expecting another shocking year for corporate insolvencies, after small businesses – particularly in retail and building - underpinned another record year for collapses.
The number of corporate collapses has reached a record for the second year running and liquidators say smaller companies are leading the charge.
During the 11 months to September, there were 9,718 companies across Australia entering external administration.
Even with one month to spare, this makes 2011 the worst year for corporate insolvencies since records started being collected in 1998. The previous highest record was in 2010, when there was 9,601 collapses.
According to the Australian Securities and Investments Commission, there were 983 companies entering external administration for the month of November alone.
Registered company liquidator Cliff Sanderon says the result is “not unexpected”, given collapses reached monthly highs in six of the 11 months analysed.
Although ASIC did not provide a sector-by-sector breakdown in its monthly collapse figures, Sanderson says both the most recent ASIC annual breakdown and anecdotal evidence shows that retail, along with building, were the two biggest categories.
Sanderson says the landscape has shifted over the past few years. After the global financial crisis, there were smaller numbers of larger insolvencies, but now it’s record numbers of insolvencies of smaller value.
He adds that the bad debts of Australian banks for the nine months to September reached $15.7 billion, down from $18.1 billion the previous year but well above the pre-GFC level of $3 billion.
Looking ahead, Sanderson says he expects “more of the same through 2012.”
“A lot of it depends on the aggression of the ATO,” Sanderson says.
“The nice terms offered by the Tax Office are coming to an end and have done for the last 18 months.
“It’s not yet clear how big their backlog is, but we’d think there’s still more to come.”
Harley Dale, chief economist with the Housing Industry Association, says there’s no doubt that “2011 was a year when the sustained weakness in new home building markets over quite a considerable time came home to roost.”
"There were a considerable number of small and medium-sized businesses that fell to pitch last year,” Dale says.
Beyond weakness in new home building activity, he says the ATO would have played a part.
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