START-UPS SOAR, BUSINESS FAILURES DOWN IN Q2

New businesses across Australia rose sharply during the second quarter of 2016. According to Dun & Bradstreet’s latest analysis of New and Failed Businesses, the number of start-ups rose 4.8 per cent compared to the same period last year, and 36.7 per cent on the previous quarter. The sharp rise between Q1 and Q2 reflects a seasonal trend, with the number of new businesses rising 27.7 per cent between 2014 and 2015, and 23.0 per cent between 2013 and 2014 for the same period.

While it’s too soon to gauge the business community’s reaction to the recent federal election, the results indicate a marked rise in confidence and favourable conditions for entrepreneurs. This was backed up by results for the number of failed businesses – entities that sought legal relief from creditors or ceased operations without paying their creditors in full. This rose annually by 14.4 per cent, but fell by 18.3 per cent between Q1 and Q2.

During the three-months ended June 2016, 71,963 new businesses were created in Australia, up from 52,626 in the previous quarter and 68,665 during the same period last year.

The total number of business failures during Q2 was 10,642, down from 13,023 in Q1, but slightly higher than the 9,304 recorded for the previous corresponding quarter.

State-by-state comparison

New South Wales remains the engine room for start-ups nationally, although Victoria spent the best part of 2015 and the first quarter of 2016 flirting with parity. In the most recent results, however, New South Wales has broken out once more as the main hub for start-ups in terms of sheer numbers. The 24,183 new businesses formed in New South Wales represents the highest figure on record for companies formed by any of the states and territories in a single quarter, accounting for 34 per cent of all new businesses created in Q2. Relative to market share, however, South Australia is the most noteworthy region in terms of stimulating growth for start-ups, with new businesses increasing 71 per cent between Q1 and Q2 this year, and 44 per cent annually.

While business failures were down nationally between Q1 and Q2, the geographic breakdown provided a mixed bag of results. On an annual basis, Western Australia saw a 22 per cent increase in the number of failures compared to the same time last year, while Tasmania experienced a 10 per cent increase during the same period. The ACT and the Northern Territory were the only regions to experience a drop in business failures year-on-year.

Australian Capital Territory

The Australian Capital Territory saw a 16.2 per cent decrease in business failures in Q2 2016 compared to the previous corresponding quarter. The ACT and the Northern Territory were the only regions to record a year-on-year decrease in business failures in Q2 2016. On a quarter-to-quarter basis, the number of failed businesses fell 36.1 per cent from 194 to a two-year low of 124. Meanwhile, new business start-ups rose 15.8 per cent in Q2 2016 compared with Q2 2015. Compared to the previous quarter, new business start-ups soared by 46.0 per cent, rising from 830 to 1212.

New South Wales

Business failures in New South Wales increased 17.2 per cent in Q2 2016 compared to the previous corresponding period, rising from 3,141 to 3,682. However, the latest result marks a 16.4 per cent decline on the Q1 2016. Meanwhile, the number of new business start-ups rose 7.9 per cent from 22,416 in Q2 2015 to 24,183. Compared to Q1 2016, new business start-ups leapt 46.2 per cent.

Northern Territory

The Northern Territory recorded the largest quarter-to-quarter decrease in business failures for Q2 2016. The number of failed businesses fell 38.5 per cent to 59, compared to 96 in the previous quarter. The Northern Territory also had the largest year-on-year decrease in new businesses, by a wide margin. The number of new businesses fell by 12% annually, from 316 to 278. However when compared to the March quarter, new business start-ups increased 40.4 per cent.

Queensland

Queensland experienced a 13.6 per cent increase in failed businesses in the June quarter of 2016 compared to the previous corresponding quarter. However, when compared to the March quarter, the figure declined by 17.9 per cent. New business start-ups rose marginally by 1.5 per cent compared to the June quarter of 2015, and leapt 46.2 per cent compared to the preceding quarter.

South Australia

South Australia recorded the smallest quarter-to-quarter decrease in the number of failed businesses, with the figure dropping 11.5 per cent from 445 in Q1 to 394 in Q2. Compared to the previous corresponding period, business failures were up 20.5 per cent. The state also experienced the largest quarter-to-quarter increase in the number of new businesses: it had 3,366 new businesses in the June quarter, up by 70.9 per cent from 1,970 in the March quarter. Compared to the previous corresponding period, South Australia recorded the largest rise in new business start-ups, which rose by 44.0 per cent.

Tasmania

Tasmania saw a 9.5 per cent increase in business failures in the June quarter 2016 compared to the previous corresponding quarter, but a 17.4 per cent decrease compared to the March quarter 2016. At 81, business failures were the lowest in a year. Meanwhile, new business start-ups were up 14.0 per cent from the June quarter of 2015, and by 58.0 per cent on the March quarter.

Victoria

Victoria experienced a 14.8 per cent increase in business failures in Q2 2016 compared to the previous corresponding quarter, with the figure jumping from 2,303 to 2,643; however, when compared to Q1 2016, the figure marks a 20.8 per cent decrease. The state saw a 3.6 per cent decline in business start-ups when compared to Q2 2015, and a 51.2 per cent increase compared to the preceding quarter.

Western Australia

The number of business failure in Western Australia rose 22.9 per cent in the June quarter 2016 compared to the previous corresponding period. However, when compared to the March quarter, the figure was down 21.8 per cent from 1,124 to 879 – its lowest result in a year. Meanwhile, new business start-ups rose by 2.5 per cent compared to a year ago, and 39.8 per cent compared to the March quarter.