Almost 10,000 Queensland businesses are facing a high risk of financial failure within the next 12 months as the resource sector struggles, according to a report by specialist accounting firm SV Partners.
And it says Queensland Nickel’s recent voluntary administration is just the tip of the iceberg for the resource industry itself, with analysis showing 32 more mining companies operating in Queensland at immediate risk of financial failure in the next 12 months.
This figure includes entities involved in exploration, quarrying, and mining services as well as those with producing coal, metalliferous, oil and gas operations.
The SV Partners March 2016 Commercial Risk Outlook Report analyses more than 20 million financial records from various sources relating to Australia’s 2.34 million operating businesses.
It identifies the sectors and geographical location of businesses most at risk of default during the next 12 months.
According to the report, 2.4 per cent of Queensland’s businesses are in the high financial risk category, making Queensland the second most at-risk state nationally after the Northern Territory.
Findings revealed the state’s high exposure to the resource sector was a key contributor to its significantly higher at-risk percentage than the 2.1 per cent national average.
The report indicated there were 84 businesses in the Queensland resource sector (including mining, electricity, gas, water and waste services) experiencing high risk of financial default and cited Queensland Nickel’s recent collapse as representative of the industry’s health.
SV Partners executive director David Stimpson said Queensland Nickel’s recent voluntary administration was only the beginning for the industry and further difficult times were ahead for Queensland businesses across multiple sectors.
“Resource sector businesses are not the only ones suffering – Queensland’s house construction, real estate services and management advice are all considered high-risk sub sectors,” he said.
“In fact, we’re starting to see evidence of some high-profile residential unit developers in the South East corner experiencing difficulties, and with the current over-supply of unit developments, I expect this trend will continue.”
Mr Stimpson said to survive in current economic conditions businesses needed to take steps to prevent and combat financial distress.
“To reduce financial risk, we urge businesses to maintain their accounting systems, report regularly, produce budgets to support financial projections and become more vigilant with accounts receivable collections,” he said.
“It’s crucial businesses seek professional advice to make sure their finances are in order.”
Data showed the Gold Coast topped the list of Queensland’s at-risk regions, with more than 2000 businesses facing immediate financial default in the next 12 months. Inner city Brisbane came in as the second most at-risk region with more than 1000 business in the high-risk category.
On a more positive note, Queensland’s health care and social assistance, and financial and insurance services industries proved to be more secure. Data indicated these industries had the lowest percentage of businesses facing immediate financial default, with only 1.15 per cent and 1.58 per cent of businesses in the high-risk category respectively.
Nationally, the report’s findings predicted nearly 50,000 Australian businesses would face adverse financial events within the next 12 months. Adverse financial events include external administrations, petitions to wind up, defaults, bankruptcies and court writs.