Insolvencies hit record peak in July

A record number of Australian businesses entered administration in July, according to new ASIC figures, in a further indication of the grim economic environment facing start-ups.

A total of 921 businesses were placed into external administration in July, a 6% leap on the same month last year.

The figure is a highest ever for the month of July since records began, and the fifth highest number of company collapses in a single month.

Businesses in Western Australia were particularly hard hit, with a 35% rise in administrations to a record July high of 77.

Creditor-led administrations rose by 17% and receiver manager appointments increased by 35%. However, voluntary administrations dropped by 23% on the previous month.

The first seven months of 2011 has now seen 5,852 Australian businesses go to the wall, an all-time record.

By comparison, 5,735 businesses entered administration in the January to July 2009, in the dark days of the GFC.

The sobering figures follow a series of grim recent data indicating that many Australian businesses are struggling to stay afloat.

Yesterday, we reported new Sensis figures that show that business profitability has hit an 18-year low, with 80% of SMEs experiencing flat or declining profits in the three months to August.

A separate Bankwest report shows that eight in 10 small businesses are finding the going tougher than a year ago.

A Taylor Woodings analysis of the figures states: “Low consumer confidence is adversely impacting sales and putting pressure on cash flows of many businesses.”

“With persistently low consumer sentiments affected in part by falling house prices, in the short term we predict insolvencies will stay at these stubbornly high levels through to the end of the calendar year and into 2012.

“Subject to a double dip recession in the US and Europe not occurring, we predict insolvencies to fall in the medium term, with companies who have deleveraged since the GFC well placed to capitalise on an uplift in consumer confidence.”