Creditorwatch has released new data that lays bare just how many SMEs are struggling through the lockdowns in New South Wales and Victoria.
The insolvency experts released a rating system that ranked different geographic areas and industry sectors based on their likelihood to default in the coming months.
“What we’re looking at on a state, capital city and industry perspective is the proportion of business that are paying more than 60 days overdue,” said Patrick Coghlan, CEO of Creditorwatch.
“If you’re consistently 60 days overdue, we give you an E payment rating, and that means you’re showing the chance of late payment and ultimately failure in the next couple of months.”
New South Wales, understandably, had a poor score, with Sydney and the ACT singled out as among the worst performing areas. However, Victoria managed to resist the slide despite Covid-related issues.
“New South Wales is high because of the lockdowns, and then the rest are quite close to each other,” said Coghlan.
What’s fairly interesting is that Victoria is there despite the lockdowns that they’ve had. I think that New South Wales is obvious, but despite 200 days of lockdown since March last year, Victoria is there with Queensland and Western Australia, who have been open this whole time.”
“What that is indicative of is that Queensland is extremely reliant on tourism. Not just domestic, but some of their economy is reliant on international tourism and they’re certainly under a lot of pressure there.”
Construction is a major area of concern, and brokers should be aware of the ongoing issues in the industry so that they can better understand the problems that their clients are facing.
“The pressure that they’re finding now is that progress payments are quite slow, because work is taking longer to get done due to the restrictions that are in place on construction sites,” said Coghlan.
“In Sydney in particular, a huge portion of workers come from those locked down LGAs, who while they could have the construction site open, they couldn’t get enough workers to get through jobs and you got that cash flow and progress payment issue where payments aren’t being made to suppliers.”
“Brokers should be aware of where their clients are based and the industry that they are in, and what their level of exposure is. From there, it’s their work pipeline – particularly in construction – and what does it look like in the future? Are they getting through their jobs or are they held up by a lack of staff?”
“We’ve seen a nice rebound earlier this year when we opened back up, and there’s talk that it might not be as good as that this time but it might be something like that. Companies need to almost hibernate or tread water to get through the reopening of the economy.”
