Suburbs in western Sydney and south-east Queensland dominate the list of areas that have the highest risk of business failure for 2024, according to CreditorWatch’s November Business Risk Index.
The report, which assesses the risk of failures in locations with more than 5000 registered businesses, found the Sydney suburb of Merrylands-Guildford is likely to see the most businesses collapse next year, followed by Canterbury and Bankstown, also in Sydney’s west.
Ormeau-Oxenford and Southport, both on the Gold Coast, ranked fourth and fifth highest, followed by Auburn in Western Sydney, Surfers Paradise on the Gold Coast, Kogarah-Rockdale in Sydney’s south, Broadbeach-Burleigh on the Gold Coast and Caloundra on Queensland’s Sunshine Coast.
CreditorWatch said that the worst performing suburbs tend to have a higher than average concentration of poorer performing industries, such as transport, postal and warehousing in the case of Western Sydney, and retail food and beverage services in South East Queensland.
In addition, “the overall population in these areas also tends to be quite young, with high levels of debt relative to lower than average incomes”, Creditor Watch found.
By contrast, the best performing areas are “regionally based, with low commercial rents, or have an older and wealthier overall population”, the report found.
The area found to have the lowest rate of business failures for 2023 were also found to have the lowest risk of business failure for 2024.
Topping the list was Ballarat in regional Victoria, followed by the Adelaide suburbs of Unley and Norwood-Payneham-St Peters.
External administrations in 2023 were up 26 per cent on 2022 and CreditorWatch CEO Patrick Coghlan said the data “illustrates the extreme stress that almost all sectors of the economy have been under this year”.
“The fact that almost every sector has seen double-digit increases in the rates of business failures across 2023 is truly shocking,” he said.
CreditorWatch said that “a significant increase in the number of tax defaults lodged against businesses” by the Australian Taxation Office was a good indicator “that business failure rates will start to rise significantly”.
Mr Coghlan said 2024 would be “very challenging” for Australian businesses, with CreditorWatch forecasting a “large increase” the national business failure rate would increase from 4.18 per cent currently to 5.80 per cent.
“Many businesses trading at a loss will not be able to sustain another six to nine months of high interest rates and low consumer confidence,” the company said.
The industries found to have the highest probability of business failure over the next 12 months are the food and beverage services sector, the transport, postal and warehousing sector and the financial and insurance services sector.