Insolvencies Are Up, But Only A Bit - Don't Believe the Hype!

You’ve probably seen the headlines, “Insolvencies back to Pre-Pandemic Levels!”, “Large Increases over This Time Last Year!” – they’re only telling half-truths. Yes, insolvencies are on the rise, but the increase is so small it’s barely newsworthy.

Insolvencies have increased somewhat this year, that’s true. The last three months reported being April, May and June have been up an average of 23% when compared to the same months in 2021. What the sensationalist articles don’t remind you of though, is Insolvency appointments have been down an average of 43% since the beginning of the pandemic. When you compare these months to the same time in pre pandemic 2019, they are still down an average of 25%.

Insolvency appointments fell dramatically at the start of the COVID-19 pandemic as government subsidies and protection measures buoyed struggling businesses. Average monthly insolvencies in the 12 months to March 2020 were 688, this fell to 347 in the 12 months to March 2021. The subsidies and goodwill fell away as the pandemic stretched on, causing many pundits to predict a wave of insolvencies. That has not eventuated yet! Average monthly insolvencies in the year to June 2022 were 409.

The other headlines you’ve possibly seen are about chaos in the construction industry. Those are absolutely true.

The Construction sector accounted for a record 28% of all insolvencies for the June 2022 quarter, being the largest industry sector in that period. Coming in second is “Accommodation and Food” with 16% of the total. 28% is the highest ever percentage of total insolvencies for Construction. On average going back to 2013 Construction makes up 19% of total insolvencies.