Financial and insurance hit by growth in 'zombie' firms

CreditorWatch/

9 September 2020
| By Oksana Patron |
image
image
expand image

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.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

2 months ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months 1 week ago

A Sydney financial adviser has been permanently banned from providing any financial services, with the regulator deriding his “lack of integrity, trustworthiness and prof...

3 weeks 1 day ago

Minister for Financial Services, Stephen Jones, has provided further information about the second tranche of the Delivering Better Financial Outcomes (DBFO) reforms....

2 weeks ago

One licensee has lost 27 advisers in the past week, now sitting at zero, according to the latest Wealth Data figures....

3 weeks 1 day ago

TOP PERFORMING FUNDS