Almost 10 percent of Australian hospitality businesses are predicted to fail over the next year, based on the latest credit data.
CreditorWatch’s June Business Risk Index (BRI) has increased its 12-month forecast for hospitality failures to 9.1 per cent, as conditions for consumers and businesses continue to deteriorate.
CreditorWatch CEO Patrick Coghlan said conditions were becoming dire for Australian businesses.
“The combination of declining order values and increasing payment defaults is a major concern as it indicates more businesses are experiencing both cost and demand pressures,” Mr Coghlan said.
The latest report found a dramatic drop in the value of invoices held by Australian businesses as declining consumer demand forced cuts to inventory.
Mr Coghlan said the average value of invoices held by businesses had fallen 49.9 percent over the year to June 2024, reflecting a drop in order values as businesses were forced to wind back inventory due to higher prices and declining demand in the economy.
“Compounding this problem is rising invoice payment defaults, which have been trending up since mid-2021.
“This indicates that businesses are finding it increasingly difficult to pay their suppliers despite lower order values.”
He said the business failure rate was deteriorating overall with an 8.8 percent increase across all industries over the past 12 months.
“The outlook has worsened for businesses in the hospitality industry with CreditorWatch now forecasting the failure to increase from 7.5 per cent to 9.1 per cent – that’s one in 11 businesses.”
The report found businesses in South-East Queensland and Western Sydney faced the highest risk of business failure, while those with the lowest risk of business failure were concentrated in North Queensland, regional Victoria and inner-Adelaide.
Mr Coghlan said the best performing regions continued to be those with a higher proportion of older businesses, and older residents, who typically had lower rates of personal insolvency than younger people.
