Data released today from the Australian Securities and Investments Commission (ASIC) paints a concerning picture of the corporate landscape, indicating a significant surge in companies entering external administration.
Figures covering the nine months from 1 July 2023 to 31 March 2024, reveal a staggering 36.2% increase compared to the same period in the previous year.
Out of the 7,742 companies that faced administration during this timeframe, the construction sector accounting for 27.7% and the accommodation and food services industry accounting for 15.2% emerged as the hardest hit, as per ASIC’s assessment.
Recent findings from the South Australian Business Chamber shed light on the primary challenges confronting businesses within the accommodation and food services sector.
Profitability and operational costs stand out as the foremost concerns, with feedback from industry players underscoring the crippling impact of overheads like electricity and wages.
These pressures are exacerbated by the broader economic downturn, placing many businesses in precarious positions.
In response to these challenges, the South Australian Business Chamber is advocating for significant measures to support struggling businesses. The Chamber proposes doubling the existing $650 energy rebate and reforming payroll tax as crucial steps to be considered in the upcoming budget, aiming to provide much-needed relief during these turbulent times.
The construction sector, meanwhile, grapples with a different set of issues, with the pandemic and its associated supply chain disruptions driving inflation and material price hikes. The industry’s reliance on fixed-price contracts, negotiated well in advance, exacerbates these challenges and necessitates strategic adaptations by businesses.
The Australian Constructors Association has called for contractual reforms, urging government and private sector clients to introduce price adjustment mechanisms to mitigate the impact of external factors on project costs. They caution that without such measures, the construction industry’s trajectory remains unsustainable.
Unfortunately, the Housing Industry Association’s research paints a bleak picture, revealing an 11-year low in new home commencements in 2023.
The recent passage of reforms complicating independent contracting, part of the ‘Closing the Loopholes’ Bill, further clouds the prospects for the Federal Government’s ambitious plan to build 1.2 million new homes over the next five years.
ASIC’s press release accompanying today’s figures underscores the gravity of the situation, projecting that the number of companies entering external administration by June 30, 2024, could surpass 10,000 — a level not witnessed since the 2012 – 2013 financial year.
Against this backdrop, The South Australian Business Chamber urges the state government to prioritise its pre-budget submission, emphasising the critical need to address the prevailing economic challenges.
Today’s data serves as a stark reminder of the extraordinary pressures facing businesses, necessitating swift and decisive action to safeguard their viability and resilience.
