BUSINESS START-UPS DOWN, FAILURES UP IN MARCH QUARTER

The number of failed businesses in Australia increased by 7 per cent in the first quarter of 2016 compared to Q4 of 2015. On a year-by-year basis, business failures were up 5.2 per cent. All states and territories except South Australia experienced an increase in the number of firms that sought legal relief from creditors or ceased operations without paying their creditors in full.

According to the latest analysis by Dun & Bradstreet (D&B), there were 13,023 business failures in the three months to March 2016, up from 12,383 in the previous corresponding quarter and 12,170 in the final quarter of 2015.

The numbers include businesses which have entered external administration and liquidation – information reported to ASIC – and those operations which were involuntarily deregistered and deemed insolvent at the time of closure.

During the three-month period to March, 52,626 new businesses were created in Australia, down 5.6 per cent from the 55,746 new businesses created during the fourth quarter of 2015, and down 2.1 per cent compared with figures from the same period last year.

All states and territories experienced a decrease in the number of new businesses started in Q1 2016 compared to Q4 2015. Meanwhile, compared to the Q1 2015, only South Australia experienced an increase in the number of new businesses created. The new market entrants have increased the overall number of businesses in operation in Australia during Q1 2016 to approximately 2.28 million.

The ratio of total number of businesses to failed businesses decreased during the quarter. For Q1 2016, there were 175 businesses for each failed business, compared to 185:1 in Q4 2015 and 173:1 for the previous corresponding period. The ratio of new businesses to failed businesses dropped to 4:1 for Q1 2016, compared to 5:1 for the two prior quarters. The current figure is equal to the ratio of 4:1 seen in the previous corresponding quarter.

State-by-state comparison

New South Wales

New South Wales reported 4,405 business failures over Q1 2016, up 7.6 per cent compared with Q4 2015, and representing an increase of 2.5 per cent from the previous corresponding quarter. New business start-ups for Q1 2016 decreased by 10 per cent year-on-year, and 10.8 per cent compared to Q4 2015, dropping from 18,324 to 16,544.

Victoria

Victoria’s business failures increased to 3,335 for Q1 2016, up 4.8 per cent from the previous corresponding quarter and up 3.2 per cent compared to Q4 2015. Meanwhile, new business start-ups fell 19.4 per cent year-on-year. Compared to the previous quarter, the number fell 23.3 per cent from 17,635 to 14,304.

Queensland

Queensland recorded a 9.2 per cent increase in business failures between Q1 2015 and Q1 2016, and a 10.4 per cent increase on a quarter-to-quarter basis. New business start-ups in Q1 2016 fell by 14.3 per cent compared with the previous corresponding quarter. The state had 9,132 new businesses registered in Q1 2016, down 11.8 per cent from 10,208 in Q4 2015.

Western Australia

Western Australia recorded a 21.0 per cent increase in business failures on a year-on-year basis, and a 15.0 per cent increase compared to the last quarter of 2015. New business start-ups decreased 11.0 per cent in Q1 2016 compared to Q1 2015, and fell 132.9 per cent compared to Q4 2015, with the number of new businesses dropping from 4,664 to 4,130.

South Australia

South Australia was the only region to experience a decrease in failed businesses or an increase in businesses in Q1 2016. Business failures dropped 6.3 per cent compared to the previous corresponding quarter and 3.2 per cent since Q4 2015. Meanwhile, new business start-ups increased by 12.2 per cent since Q1 2015, with the figure growing from 1,729 to 1,970. However, the number represents a 14.8 per cent decrease on the December quarter of 2015.

Northern Territory

The Northern Territory recorded a 21.9 per cent increase in business failures between Q1 2015 and Q1 2016, from 75 to 96. Compared to the previous quarter, business failures increased 10.4 per cent. Meanwhile, the region saw the country’s biggest decrease in new business start-ups. Compared to the previous corresponding period, the number of new businesses plunged 37.4 per cent from 272 to 198. The figure represents a 32.8 per cent decrease on the previous quarter.

Tasmania

Business failures in Tasmania increased by 7.1 per cent between Q1 2015 and Q1 2016, and 13.3 per cent on the previous quarter, from 85 to 98. New business start-ups dropped 8.7 per cent compared to the previous corresponding period. The figure represents a decrease of 13.9 per cent when compared with the December quarter of 2015, with the figure falling from 434 to 381.

ACT

The Australian Capital Territory saw a 3.1 per cent rise in business failures in Q1 2016 compared to the previous corresponding quarter. On a quarter-to-quarter basis, the number of failed businesses grew 18.4 per cent from 159 to 194. Meanwhile, new business start-ups dropped 5.8 per cent in Q1 2016 compared with Q1 2015. Compared to the previous quarter, the ACT’s new business start-ups fell 12.7 per cent from 935 to 830.