Data reveals bad debts rising across the economy, with construction sector hardest hit

Data from National Credit Insurance Brokers shows bad debts are on the rise across the economy, with businesses exposed to the building and hardware, electrical, food and printing sectors the hardest hit.

The data, which tracks insurance claims for bad debts, shows bad debt claims made in June were 44% higher than the average monthly level seen over the past five years.

Hardest hit was the building/hardware sector, with $748,766 worth of debts defaulted on in June, followed by electrical sector at $729,098, the paper/print sector at $670,658 and the food/provisions sector at $669,976.

It appears industries exposed to Australia’s struggling residential construction industry are struggling.

As well as the high debt levels in the building/hardware industry and the electrical sector, high debt levels were also seen in the plastering sector ($613,046 worth of debts defaulted on during the month), the timber sector ($547,400) and the plumbing sector ($505,482).

The chemicals sector ($546,855 worth of debts defaulted on) and the advertising sector ($320,262) were also affected.

Rob Lamers, chief executive of debtor finance provider Oxford Funding, says the figures suggest the economic recovery remains fragile, and cashflow is still a big problem for SMEs.

“Liquidity and access to cash are absolutely critical in an upturn as businesses seek to meet growing demand. However these figures indicate that some industries are still feeling the pains from the GFC and are defaulting on what they owe.”

There was one positive note from the data – while 94 bad debt claims were made in June 2010, 129 outstanding claims were settled in the same month.