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Local business continues its struggle to stand

Business failures around the world are at an all time low, but it seems local businesses aren’t enjoying this global trend.

As reported in the Dun & Bradstreet (D&B) Business Failures Report, Australia has seen a 12 percent increase in business insolvencies.

“The rise in insolvencies may have reflected knock-on, lagged effects of the 2008-09 global financial crisis as well as declines in business credit and relatively higher interest rates,” D&B CEO Christine Christian said.

Alongside Europe, Australia now sits 23 points higher than the United States and 30 points higher than the United Kingdom on the D&B Global Insolvency Index (GII), which ranks business failures in over 30 key economies.

“Outside the mining sector, sentiment is generally still poor and the strong Australian dollar is straining profits,” Christian said.

ASIC results have shown almost 1,000 corporations went into involuntary administration in July alone, proving 2011 to be a record year for insolvencies.

In the June quarter, the majority of insolvencies were found in construction, retail, manufacturing and services.

As a result of the weak outlook for demand in the United States, the performance of the services sector is expected to continue falling, accounting for over a third of insolvencies.

With the current favourable macroeconomic conditions in Australia, Dun & Bradsteet are hopeful that lagged bankruptcies from the 2009 slowdown will taper off.

However, Christian expressed concern for businesses going into 2012 if overall confidence remains weak.

“We are likely to see a further dent in corporate profitability and payments performance, raising the risk of corporate insolvency.”