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240,000 businesses to collapse, Deloitte warns

  • July 21 2020
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Invest

240,000 businesses to collapse, Deloitte warns

By Cameron Micallef
July 21 2020

Economists are warning that 10 per cent of Australian businesses face financial ruin as JobKeeper and loan deferrals end in September.

businesses to collapse

240,000 businesses to collapse, Deloitte warns

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  • July 21 2020
  • Share

Economists are warning that 10 per cent of Australian businesses face financial ruin as JobKeeper and loan deferrals end in September.

businesses to collapse

Analysis by consultants Deloitte has found around 240,000 businesses in hospitality, professional services and transport industries, in particular, are at a high risk of failure once government support ends in September.

Under the current federal government arrangements, businesses will receive their last JobKeeper payment on 27 September — around the same time as many rental and loan repayment deferral agreements are also set to end.

Deloitte warns 40 per cent of businesses across hospitality, professional services and transport have indicated their cash reserves can cover less than three months of operations in the current environment. 

“While it’s expected the business environment will improve over the next three months as restrictions are eased (but don’t forget Melbourne), it’s not known whether any improvement will be enough to enable businesses to recover, let alone survive, without JobKeeper support,” Deloitte said.

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The consultants found that New South Wales, Victoria and Tasmania had the highest percentage on JobKeeper, but noted all states and territories will be impacted by the changes in September.

“Unsurprisingly, this doesn’t bode well for Victoria, where the latest outbreaks have led to increased restrictions. Already one of the states with the highest proportion of businesses claiming JobKeeper, along with New South Wales, this new round of restrictions is likely to create further problems. In addition, one in four businesses in Victoria operates[s] in the high-risk industries identified above. ”

Businesses operating in Australia’s two territories face relatively lower risks. While around 30 per cent of those in the Northern Territory and the ACT have accessed JobKeeper, this is much lower than the rest of the country.

Business insolvency hurts business owners, employees as well as creditors and suppliers.  

“Canberra may well announce specific packages to support businesses beyond September. But in the meantime, it’s incumbent on suppliers, creditors and insurers to prepare contingency plans for a significant rise in hardship and bad debts,” Deloitte said.

“To do so, it’ll be important to consider the characteristics of the businesses they deal with — the industry they operate in, their size and their existing financial resilience, including the ability to borrow and service any additional funds.”

240,000 businesses to collapse, Deloitte warns
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About the author

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Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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