Fewer businesses reported a revenue decrease in October compared to July, showing that businesses are stabilising as the economy recovers from the coronavirus recession. However, experts are saying this may be a sign of insolvencies to come.
New data from the Australian Bureau of Statistics’ (ABS) COVID-19 Impact Report released on Thursday shows that while 47 per cent of businesses reported a revenue decrease in July, only 31 per cent of businesses did in October.
“It’s positive to see today’s ABS figures showing that business revenues are stabilising because cashflow is ultimately what is going to decide whether companies survive or fold over the coming few months,” said CreditorWatch Chief Economist, Harley Dale.
However, Mr Dale says that the stabilisation is due to current government hand-outs, and may not be the best long-term method to sustain small businesses.
“The fact that such a large majority of firms aren’t seeking new funds is indicative of the one-size-fits-all approach that the government stimulus measures have taken,” he said – the ‘one-size-fits-all approach’ referring to stimulus packages given to businesses by the Government to assist them in staying afloat through the recession.
Entrepreneur and innovator Hugh Stephenson has highlighted the need for more forethought to be given to insolvencies that will be seen in the wake of the pandemic, and has called for more Government support.
“There’s really a question here of how do we avoid the wave of bankruptcies or liquidations,” he said. “That’s probably going to be endemic coming out the other side of the pandemic, particularly once things like JobKeeper starts rolling back, which has no doubt propped up many businesses that would have otherwise been well and truly dead.”
When proposing alternative methods to support businesses, Mr Stephenson pointed to the United Kingdom’s use of loans to carry the sector.
“I’m not a fan of grant programs. That’s the government’s typical mechanism to support any particular industry,” he said.
“There’s definitely been some interesting alternative models. The UK has shown some interesting models in terms of being able to provide effectively through a loan scheme.
Almost like a HECS loan type model for business owners, whether they’re new or existing, where there is a sort of very low level of recourse. Loans, I think, are a very typical way that you can support the business sector as a whole, because that suits both venture-funded type companies, as well as regular SMEs.”
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