Latest insolvency figures perplex industry insiders
LATEST insolvency figures show a perplexing trend as the SV Partners Commercial Risk Outlook Report has shown a 0.7 per cent decrease in local businesses at risks of collapsing due to unmanageable debts.
March figures for Rockhampton saw insolvency risk fall from 2.3 per cent to 1.6 per cent in just six months.
The figures are also compatible to other cities in the region as Mackay rates sit at 1.9 per cent and Gladstone trumps Rockhampton with 1.4 per cent rates of risk.
SV Partners associate director Frank O'Neill (pictured) said the figures were surprising considering the recent collapse of JM Kelly and the repercussions it had on local businesses.
"It's interesting because the Central Queensland economy is quite sluggish at the moment, there is quite stagnant wage growth and high costs of living plus the collapse of JM Kelly, which impacted a lot of smaller, family-owned companies,” he said.
" So, to be honest, the figures are a little bit surprising.”
Mr O'Neill said the data shows promising signs of the integrity of small local businesses and their ability to ride out slow economical periods.
"At the same time, it is a good indicator of companies' ability to actually see through this uncertain time,” he said.
"It seems apparent that companies have learnt from struggles in the past and have learned how to manage cash and work hand in hand with their accountants to get through uncertain periods.”
Mr O'Neill hoped the figures would spark more investor confidence in the region and he was confident that would happen.
He also highlighted sectors that have higher risks of insolvency but according to Mr O'Neill, they are high risk industries in broad terms on a state and national level as wage growth is being experienced all over Australia.
There are certain industries that are at more risk than others and they include retail, accommodation and hospitality.
"The first thing people do when they want to save is they stop spending money in these areas,” he said.
"Small retail businesses with online and overseas competition really feel the squeeze.
"The regions are a great place to live and there are a lot of opportunities, but at the same time, it depends on getting the right people to the regions for the rights jobs.
"It's hard to predict trends but the indicators are showing that it is continuing to go down.
"But it only takes a skew in interest rates, residential pressures down south or stricter lending criteria that we are currently seeing to change this.”
Mr O'Neill expects franchisees to encounter financial stress in the wake of the royal commission into the financial sector as increased costs put on franchisors will be passed down through franchisees and on to customers.