One in eight construction firms are in arrears with payments by 60 days or more – the highest level of any industry, according to new research.
Credit reporting agency CreditorWatch has launched a new monthly indicator series, the Business Risk Index, which measures insolvency risk by region and industry using data from 1.1 million ASIC-registered credit-active businesses.
Payment arrears in the construction industry were 12.4 per cent in the September quarter, followed by accommodation, food and beverage, with 11.1 per cent of businesses in arrears, and transport, postal and warehousing at 10.7 per cent.
“The construction sector has been hit by forced shutdowns in New South Wales and Victoria,” said CreditorWatch chief economist Harley Dale.
The industries with the lowest payment arrears were: healthcare and social assistance (6.2 per cent of businesses in arrears); agriculture, forestry and fishing (7.5 per cent); and education and training (8.1 per cent).
CreditorWatch estimates that the industries with the highest probability of default over the coming year are: food and beverage services, with 5.9 per cent of businesses potential defaulters; arts and recreation services (4.3 per cent); and financial and insurance services (4.1 per cent).
It estimates that the regions where the probability of default is highest are Coolangatta in Queensland, Canterbury in Sydney, Bringelly in greater Sydney, Gold Coast in Queensland and Merrylands in Sydney. In each of these regions more than 7 per cent of businesses are potential defaulters.
The results for Coolangatta and Gold Coast indicate the trading difficulties that occur when state borders are closed.
Dale said defaults have been down this year, as creditors, the tax office and financial institutions have worked with businesses whose accounts are in arrears. Defaults were down 7 per cent in the September quarter, compared with the previous quarter, and down 25 per cent compared with the same period last year.
“This is a good result but the magnitude of the decline suggests an increase in defaults will occur in October,” he said.