Smaller food and accommodation businesses doing it tough
There has been a spike in the number of accommodation and food services businesses becoming insolvent, despite a booming tourism market.
The Australian Securities and Investments Commission (ASIC) has released its annual report on corporate insolvency, finding the number of SMEs going broke in the last financial year was broadly consistent with the 2016-17 year. However, the number of insolvencies in the accommodation and food services sectors jumped from 884 in the 2016-17 year to 1064 in the 2017-18 year.
The proportion of businesses reporting issues with cashflow increased from 47 percent of cases in 2016-17 to 49 percent of cases in 2017-18.
Other reasons companies went broke also included non-payment of statutory debts such as GST, difficulties paying other debts when they were due and a shortage of working capital or unprofitable trading.
There has also been ongoing difficulties for smaller retail and travel businesses, who are feeling the pinch from a swathe of larger hotels brands coming into the pipeline, Airbnb and online travel companies.
Overall, there were 8202 insolvencies in the 2017-18 year, 78 percent of which were businesses with less than 20 workers, down from 79 per cent in the 2016-17 year.
Sheridan Randall, 19th November 2018
