Financial and insurance hit by growth in 'zombie' firms
Financial and insurances services have been among the worst-affected sectors in terms of zombie businesses in August, with an average number of 53 days of payments overdue compared to 43 days nationally, according to digital credit agency CreditorWatch.
The change represented a 657.1% growth from August 2019 and meant that payment times grew by 11 days compared to July, 2020.
CreditorWatch’s data revealed the biggest rise in ‘zombie’ companies since the Government extended its Safe Harbour measures in December, which prevented businesses insolvencies. Business administrations fell 37.1% from July to August which meant that a higher number of Australian business were currently relying on Government support to operate.
Victoria saw the biggest fall in business administrations in August (49.3%) and was followed by New South Wales which recorded a 34.3% decrease and Queensland which saw a 25.4% decrease in external administrations.
CreditorWatch’s chief executive, Patrick Coghlan, said that whilst Safe Harbour legislation was critical in stabilising the Australian economy as it went into recession, the measures were now becoming counterproductive because they were propping up companies that should be allowed to fail.
“By extending the moratorium to December, the Government is wasting taxpayer money by kicking the can down the road. It means that solvent businesses are having to trade with otherwise insolvent debtors, risking their own health, whilst doomed businesses are able to put off paying creditors or even the ATO,” he said.
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