External administrations increased by 61 per cent over the last month, stirring fears that more businesses will need to close their doors once JobKeeper expires at the end of the month.
The latest figures from CreditorWatch have exposed an increase from 254 external administrations in January to 408 administrations in February, the highest the number has risen for a year.
The surge in insolvent companies within the first two months of 2021 comes after ASIC data showed a 12 per cent decrease in external administrations over the last year as numerous government support packages helped keep businesses afloat in tough financial settings.
Though, as the JobKeeper scheme is set to end on March 28th 2021, the consensus is that administration figures are set to rise again, particularly as companies struggling to keep their head above water finally accept the reality of their situation. This would kick off a chain reaction of insolvencies, which will then cause redundancies, which could initiate a breakdown on the local economy.
Credit inquiries on the up
Despite the rise in insolvencies, credit inquiries have increased by 29 per cent, a sign that trading situations are improving, and that some companies are set to return to their usual levels of service.
The rise in credit inquiries reveals that businesses are stocking up and buying the underlying materials needed to make products and services to feed the economic growth.
The February credit inquiry figure is the highest monthly number since August 2020. On a quarterly basis, credit inquiries are up by 10 per cent in the three months to February 2021, in comparison to the same period 12 months ago.
Countless businesses are set to succeed in a post-COVID setting after becoming leaner and adjusting their business models. This is very encouraging and will be important in kick-starting a chain-reaction result across both the business sector and broader economy.
At Paris Financial we are being proactive by consulting with a few of our clients caught in the wrong sector and been smashed by the pandemic. We have lead them to have a chat with a professional administration firm that we are affiliated with. This allows them to set the best course for their long-term financial survival. The time to act is now if you are in such a predicament.
Come and chat to us if you are in this category.