August business failures revealed but economic support keeps numbers down

At least 390 businesses across Australia entered liquidation in August as worsening economic shutdowns gripped the country’s two most populous states.

The spread of the Delta variant of Covid-19 has seen shops and restaurants shut across Victoria and NSW, while efforts to contain the spread have seen numbers on work sites reduced and lower demand for materials.

However, the latest figures show economic support payments continue to support troubled businesses, with no jump in failures.

But some industry watchers say the longer lockdowns drag on the worse the recovery may be.

EY partner, turnaround & restructuring strategy, Stewart McCallum said savings buffers and motivation to go on was wearing thin for many.

“It’s almost like Covid is wearing businesses down,” Mr McCallum said.

“They were able to make it through 2020 on the back of JobKeeper and commercial landlord relief.

“But with every lockdown comes an increased psychological and financial hurdle to jump over.”

Mr McCallum said EY had seen an increase in Australian divisions of international businesses seeking assistance.

“All those financial operational issues that we’re facing here the overseas parents are facing as well,” he said.

“But all of their focus is on what’s happening on their home patch.

“The subsidiary businesses half a world away that’s also struggling – they don’t have the management bandwidth or financial resources to focus on what’s happening in Australia.”

Mr McCallum said some businesses were taking a more immediate hit from lockdowns, with hospitality venues forced to destroy stock.

“Most businesses coming to us are because of the impact of Covid,” he said.

“You’ll always get situations where businesses are managed badly and will fail, but by and large the impact of Covid is resulting in the business coming to us.”

NSW was the worst affected state in August with 150 businesses entering liquidation, more than double Victoria’s 67.

That compares to the 113 NSW and 72 Victorian businesses that failed in August 2020.

Queensland lost 59 businesses in August, with the sunshine state spared from Covid-19 outbreaks firmly entrenched in NSW and Victoria.

This was followed by 26 business failures in Western Australia, 16 in South Australia and 14 in the ACT in August.

Tasmania lost just one business in August.

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