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SME insolvencies hitting economy hardest

Insolvency and business recovery firm Jones Partners released the inaugural 2014 Insolvency Report this week.

The report found that 81 per cent of companies that failed during 2012/2013 had fewer than 20 employees, resulting in more than 74,000 job losses.

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Corporate insolvencies – that is, collapses of companies with 200 or more employees – only accounted for around 6,250 redundancies.

"High profile insolvencies tend to dominate the media and as a consequence captivate public attention," said the report.

"The narrative is often about the extreme dishonesty of certain promoters or the tragedy of large numbers of people becoming unemployed," it said.

The statistics within the report reveal the "harsh reality" about risk in the SME sector and its "robust appetite for entrepreneurship and commercial endeavour," said the report.

Corporate insolvencies grew by about 64 per cent in the decade to 2013/2013, peaking during the economic slowdown at the height of the GFC, according to the report.

Jones Partners managing principal Michael Jones said a "dynamic" SME sector is "crucial" to Australia's economic performance.

"While Australia’s corporate insolvency landscape is dominated by smaller companies, it is also the SME sector that contributes most to employment opportunities, demonstrating a robust appetite for commercial endeavour, risk and entrepreneurship," said Mr Jones.

"During more buoyant times there is a higher level of confidence in the marketplace, credit is more readily available and insolvency activity reduces, despite more companies operating," he said.

"However, when the underlying economic conditions deteriorate, insolvency levels are impacted. During the global financial crisis in 2008/2009, company insolvency administrations grew by a record 26.5 percent, the highest rate in a decade," said Mr Jones.

 

SME insolvencies hitting economy hardest
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