Administrations rise in September

  • By AB+F Editorial

The number of businesses entering into administration rose for the first time since June, up 11 per cent in September, while the number of business defaults increased by 23 percent in September - the first increase recorded since May 2020. 

The data by CreditorWatch comes at a time when the government moves to cut JobKeeper. 

The data also follows details announced by the Commonwealth Bank on the level of f SME loan deferrals on its books which revealed an increase in business owners starting to make repayments. 

According to CredtorWatch, the slight rebound in business default and administration figures suggests that some of the so-called ‘Zombie’ businesses – those reliant on government support for survival – are waking up to the reality of their situation and shutting up shop

Overall, though, defaults and administrations have shown long term decline. 

However, there was significant variance between states, according to CreditorWatch Business Risk Review data for September 2020:

• Victoria recorded a 23.8 per cent increase in business administrations, following a 49.3 percent decrease in August 

• QLD recorded a 24.1 per cent increase in business administrations, following a drop of 25.4 in August

• NSW recorded a further 1.6 per cent decrease in business administrations, following a 34.3 percent decrease in August

Credit enquiries on the CreditorWatch platform, dropped 6 percent in September after four months of positive increases. 

However, enquiries were higher on average over the past four months compared to the previous eight, signifying that businesses are trying to remain active. 

“Seeing businesses enter into administration is never something you want to celebrate,” CreditorWatch CEO Patrick Coghlan said. 

“However, September’s increase in default and administration rates does indicate that some businesses which have been reliant on government support are starting to accept the reality of their situation and are taking steps to settle with their creditors,” he added. 

“What we don’t want to see is businesses that are doomed to fail continuing to operate and taking healthy companies down with them. The long term-trend is that Zombie companies will continue to survive on government support and so the next six months are crucial in determining what position we start our economic recovery from"