Businesses in western Sydney and parts of the Gold Coast are among the most likely to default in the next 12 months, according to a new “regional credit score” from the risk assessment firm of credit CreditorWatch.
In its new Business Risk Index, launched on Wednesday, CreditorWatch says businesses in the Merrylands-Guildford area in western Sydney have a 7.76% chance of defaulting by September 2022.
The northern section of the Gold Coast comes just behind with a 7.74% chance of failure.
The Bringelly-Green Valley and Canterbury regions in western Sydney rank third and fourth, respectively, while Qld’s Coolangatta faces the fifth risk of business failure, at 7.45%.
Businesses in West Sydney have struggled to operate despite severe coronavirus lockdown restrictions and stay-at-home orders limiting movement in designated COVID-19 hotspots,
Difficulties for Gold Coast businesses reflect slowing tourism through COVID-19 lockdowns and the state’s closed border with NSW,
Beyond these surface observations, CreditorWatch says its new predictive system uses data from the Australian Securities and Investment Commission on 1.1 million loan companies and a lot of inside information.
The company says it’s looking at raw data on defaults, lawsuits and outside administrations – all of which are sitting at moderate levels due to lockdowns, lender leniency and government financial support – To draw its conclusions.
“Defaults are down seven percent from the September 2021 quarter and 25 percent from a year ago. This data point will also increase over time, the question is when, ”CreditorWatch said.
“This is a good result, but the magnitude of the drop suggests that an increase in defaults will occur in October.”
Optimism about easing restrictions on the east coast has been drowned out by other financial alarm bells, the firm notes.
“The increase in business-to-business defaults combined with weakening average credit scores in the Sydney and Melbourne CBDs are early warning indicators of a future increase in upcoming business insolvencies in these major cities. city centers, ”said James O’Donnell of Open Analytics, who designed the new CreditorWatch tool.
Nationally, the Business Risk Index indicates that companies in the food and beverage sector face the highest probability of default through September 2022 at 5.9%, reflecting the continued damage of blockages.
Arts and recreation services rank second, with 4.3% of businesses at risk. Financial and insurance services recorded a default probability of 4.1 percent.
The construction sector was reported as the industry with the highest percentage of late payments, with 12.4 percent late on payments over 60 days.
The grim figure comes after months of stop-start construction in the country’s most populous states, leading to missed deadlines and cost explosions for builders and developers.
Hospitality was second in arrears, with 11.1 percent late on payments.
“However, in a less tight economic environment, these types of industries can most certainly rebound,” said Harley Dale, chief economist at CreditorWatch.
“Consumers will appreciate being able to dine out and socialize normally over a cup of coffee again. It’s a massive tick for the hospitality industry, a vital employer in the global economy. “
As conditions return to ‘normal’, both in terms of business activity and insolvency proceedings, parts of regional Australia appear to be performing better than their metropolitan counterparts.
Swan Hill in Victoria recorded the lowest probability of future business failure at 3.67%, while the Limestone Coast region of South Australia recorded a chance of 3.72%.