Financial services has been listed amongst the industries housing “zombie” businesses which may not survive beyond the Government’s removal of Jobkeeper and other support.
Data compiled by CreditorWatch has revealed that financial services firms are amongst the increasing number of small to medium-sized enterprises (SMEs) across the country which are delaying entering into administration and are instead remaining propped up by government support.
In fact, the financial and insurance services sector is revealed amongst the top five most affected in terms of payments which are overdue, increasing by 650% to 75 days.
Importantly, the degree to which Government support appears to be delaying the inevitable is revealed in a 20% decrease in the number of SMEs entering into administration from May to June; and 50% fewer than in June 2019.
CreditorWatch chief executive, Patrick Coghlan said that while the data for June, which also shows a 17% decrease in court actions and a 25% decrease in payment defaults, would traditionally indicate a healthy economy, policy makers should be concerned.
“While at first glance, a decrease in business administrations, court actions and defaults seems to indicate a rebounding economy, however when we take a deeper look, it’s clear that trouble is brewing and that businesses are struggling with significant cash flow issues,” he said.
He said payment delays gave the game away with payments in June overdue by an average of 49 days across all industries, 342% higher than the June 2019 figure. The growth was even greater across industries like Arts and Recreation (up 900%) and Retail (up 367%), suggesting that behind the scenes, SMEs are struggling to make ends meet.