The December 2021 CreditorWatch Business Risk Index (BRI) has revealed that Australia’s trading activity was at its lowest point since the pandemic began due to the impacts of the Omicron variant.
Trade receivables for December were down a massive 45% on December 2020 figures.
Omicron conspired to ruin Christmas for many businesses through a combination of staff shortages, supply chain disruptions and consumers choosing to stay at home rather than go out and risk contracting COVID.
The data also showed a dip in defaults, external administrations, payment arrears and court actions from November to December. Credit enquiries were also down after a 17% jump from October to November, although this was due to seasonality more than anything else.
The nationality probability of default for December stands at 5.7%, down slightly from 5.79% in November.
Three regions of Western Sydney were in the top five regions most likely to default nationwide.
The default regions are:
1. Gold Coast – North QLD: 7.69%.
2. Canterbury NSW: 7.66%.
3. Springfield - Redbank QLD: 7.44%.
4. Merrylands – Guildford NSW: 7.79%..
5. Bringelly – Green Valley NSW: 7.74%
Probability of default by industry number one was accommodation and food service 6.9% followed by arts and recreation services 4.7% and education and training 4.7%.
The lowest probability of default was manufacturing 3.5%, wholesale trade 3.5% and electricity, gas, water and waste Services 3.7%.
The number of defaults fell sharply in December 2021. That is hardly surprising given a spike of 53% in November.
Throughout 2021 the number of defaults averaged far lower than in 2020. Taking the last data points, defaults fell by 5.1% in the December 2021 quarter compared to the September quarter.
However, businesses are being protected by a relative degree of leniency still being afforded them by financial institutions and creditors. How that dynamic plays out in 2022 will tell a lot about the shape of Australia’s economic recovery against the backdrop of the uncertainty everybody faces.
“Everyone was expecting that the rapid spread of Omicron would have a significant adverse impact on Christmas trade, but few would have predicted it to be this extreme,” CreditorWatch CEO Patrick Coghlan said.
“You can’t blame people for wanting to stay at home. We can only hope that the peak arrives soon and the business community can get back on its feet.”
He said Key Business Risk Index insights for December were:
• Christmas trading activity the lowest on record due to impacts of Omicron
• We expect trade activity to continue to slide during the first half of 2022.
• Defaults, external administrations, payment arrears and court actions have dropped. This is typically the case in
December so we will be keenly watching the 2022 data for the size of the bounce.
The gong for the number of businesses with a proportion of payment arrears of 60 days or more belongs to the construction industry. Commercial activity has suffered in key areas such as offices and on the residential front, COVID has been no friend to a sector reliant on progressive payments.
Transport, postal and warehousing comes in next with an arrears rate of 9.4 % compared to 10.3% for construction. Supply constraints, COVID cases among workers and resulting strike action crippled this industry in late 2021.
Accommodation and food services is an industry where 9.3% of businesses are 60 days or more behind payments. Once lockdown restrictions eased in late 2021 there was so much promise for so many SMEs in this space.
