Business collapses leapt 25% in the three months to the end of June, with data from Dun & Bradstreet showing that firms with between one and 49 employees were hit hardest.
The D&B figures show 2,898 firms failed during the June quarter of 2011, up a worrying 25% on 2010.
Collapses were highest in the finance, insurance and real estate sector, with the services, construction and retail sectors the next hardest hit. Collapses climbed highest in Victoria (up 26%) and New South Wales (up 22%).
Smaller firms were hardest hit. Firms with one to five employees saw collapses climb 20%, while firms with six to 19 employees saw failures jump 30%.
Insolvency expert Cliff Sanderson of insolvency firm Dissolve says the data tallies with what he is seeing in the market.
“Construction is always a standout and in retail we’re seeing a lot of small restaurants just go out of business.”
While poor consumer confidence is clearly weighing on many sectors, Sanderson says the ATO is the real cause of the jump in business failures as it chases tax debts, particularly those accrued in 2008 and 2009.
He expects the figures will continue to climb, partly because business closures can take a while to show up in official insolvency data.
“If you are director and you’ve shut the doors, there are no assets there to pay a liquidator. You don’t liquidate unless you have to and that’s where the ATO comes in. They hit a director with a Director’s Penalty Notice and the director has to act.”
He also says the ATO is likely to take some time to work through a backlog of tax debts it has taken during the GFC and post GFC period.
“The taxman isn’t going to hit 3,000 companies in a month. He’ll take a slow and steady approach.”
The D&B data also shows 41,000 businesses entered the market during the June quarter, up 16% on the March quarter.
However, start-up entrepreneurs are becoming very particular about the sectors they avoid. Retail start-ups fell 91% in the 2010-11 year, while the number of new service-based firms fell 85%.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
