Rising rents, cautious consumers behind rise in insolvencies

The number of companies entering insolvency in March reached a near-record high of just under 1,500, according to the corporate regulator, with cautious consumers and rising rents believed to be behind the worrying result.

Figures from the Australian Securities and Investments Commission show the number of company collapses reached 1,491 in March, versus 1,299 in February and 640 in January.

The 1,491 figure is one of the highest ever figures released by ASIC since the late 1990s, and a significant rise on March 2010’s figure of 1,313.

New South Wales topped the March 2011 figures with 576 insolvency appointments, followed by 417 in Victoria.

Queensland was next with 298, while Western Australia had 110. South Australia recorded 49 insolvency appointments, and the Australian Capital Territory had 19. Tasmania had just 18, while the Northern Territory had the lowest figure of four.

ASIC adds that the number of companies entering external administration in March was 968 Australia-wide, up from 852 in February and 455 in January.

Small Business Council of Australia chief Peter Strong warns we might not have seen the worst yet, with the impact of the flooding and Cyclone Yasi in summer not yet reflected in the numbers.

“If you start expanding that out across the year, it’s not a good sign,” Strong tells SmartCompany.

He believes retail and transport would account for a large part of the insolvency figures.

“Rising rents would be playing a significant role,” Strong says.

“And it’s a bit hard to save your business when you’re also managing red tape, like GST, super and paid parental leave.”

He says the increase in insolvencies from January probably reflects businesses which hung on for a good Christmas, but didn’t receive one.

Strong says small business has battled “decades of neglect” from governments of all persuasion, and reiterates his call for special attention in tomorrow’s budget.