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One third of new businesses failed during GFC : ABS

One third of new businesses failed between June 2007 and June 2009 according to the Counts of Australian Businesses, including Entries and Exits data released by the Australian Bureau of Statistics (ABS).

Australian Bureau of StatisticsThe total number of new businesses actively trading in Australia fell by 1 percent in 2008/09, with the number of business failures almost entirely offset by new business ventures.

Of the 316,867 new businesses that commenced trading during 2007-08, 71.5 percent were still operating in June 2009. The survival rate for new businesses with employees was higher than ‘non-employing’ businesses (sole traders) during 2007-08 at 81.9 percent compared to 66.6 percent respectively.

The Counts of Australian Businesses, including Entries and Exits data from the ABS found the fall in total business numbers in Australia during the GFC was due to a decrease in new business registrations, with business finance tight during the GFC and entrepreneurs waiting until business conditions improved responsible for the decrease. Surprisingly, the business exit rate remained steady during the GFC, at 15.4 percent for both the 2007/08 and 2008/09 financial years.

As of June 2009, Australia had 2,051,085 actively trading businesses. Of those, the greatest number of businesses were involved in the construction industry (17%), followed by professional, scientific and technical services (11%). Rental, hiring and real estate services accounted for 10% of all Australian businesses.

Partnerships and sole proprietor business structures fell out of favour during the period, most likely due to the risk of operating with your own capital funding entrepreneurial endeavors during the GFC, with the ABS finding as of June 2009 showed a 5 percent drop in the number of partnerships and a 2.5 percent drop in sole proprietors. In contrast, there was a 3.3 percent increase in trusts. The number of companies remained stable compared to the previous year.

Small businesses made up the vast majority of Australian businesses operating as of June 2009 with almost two million businesses employed less than 20 staff (including those who did not employ any staff) and a similar number of businesses had an annual turnover of less than $2 million.