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Business insolvencies picking up

27 July 2021 6:17AM

Business insolvency numbers were up 23 per cent in the June quarter, compared with the June quarter last year, according to the latest Equifax Quarterly Business Credit Demand Index.

The accommodation and food services industry was particularly hard hit, with insolvencies doubling year-on-year.

An indication of how hard business indicators are to read in the current environment is that business insolvencies in the June quarter were 37 per cent below the June quarter 2019 and insolvencies in accommodation and food services in the June quarter were 13 per cent down on 2019.

Business credit demand picked up strongly in the June quarter, before the latest round of lockdowns set in, with credit applications growing 14.4 per cent compared with the same period last year.

Business loan applications in the June quarter were up 15.4 per cent year-on-year, trade credit applications were up 19.4 per cent and asset finance applications were up 9.8 per cent.

Equifax said the June quarter figures were above pre-COVID levels – 8.2 per cent higher than credit applications in June 2019.

The sectors with the biggest demand were construction and retail trade, although there is now a question mark over the recovery in both sectors.

Equifax general manager commercial and property services, Scott Mason, said: “Construction businesses are particularly reliant on the continuity of cash flow. The sector is thinly capitalised, with low margins and a fiercely competitive environment struggling to access labour and materials.”

 

 

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