“Here comes the Claims again, falling on my desk like a memory…”
OK, I have jumbled some words on this Eurythmics classic hit from 1983, “Here Comes the Rain Again” was one of my favourites and maybe shows my age! The last few years have been unique in every possible way. We have lived through a worldwide pandemic, snap (and prolonged!) lockdowns, border closures and a whole variety of other challenges.
Throughout the pandemic, we kept hearing terms like “tsunamis” or “waves” of business insolvencies being on the horizon – which in fact never happened. This was due in no small part to the stimulus and targeted relief provided by the government (both state and federal) and the hardship assistance and repayment deferrals provided to businesses by their creditors – including banks and the ATO.
Alas, there is an end point – and Claims are again falling on our desks like a memory! We are seeing the ATO, creditors and banks ramping up collection activity and recovery of monies due. The expectation is payment defaults and insolvency rates will rise. The evidence of this is stark with July data of ASIC insolvency appointments over the last 4 years showing a return (already) to pre-pandemic levels:
In the UK, reports show insolvencies are at the highest levels since 2009. The UK are often 6 months ahead of Australia but no doubt, the trends are evident – in that claims in this market will continue to increase. NCI’s own commercial collection division is noticing an increase in activity – often leading to claims.
In terms of industries, the challenges in the building and construction sector are well known. There are supply chain issues, rising cost of materials and labour shortages. In March 2022, NCI received 107 new claims following the failure of Probuild and Condev. What is often forgotten is the domino effect insolvencies of this magnitude create across the entire sector – and beyond. In July, a further 89 new claims were received.
The challenges are not isolated to building and construction. We are seeing casualties in hospitality and transport as businesses across a range of industries grapple with soaring inflation and rising interest rates. We expect many will not survive the bleak economic outlook – especially with the ATO intensifying collection activity on unpaid tax debt/s that runs into the billions.
It is not all doom and gloom, however.
NCI’s purpose is to help protect and enable our clients to grow. We provide a number of trade credit solutions to assist business in navigating these uncertain times. Whilst trade credit insurance is the ultimate protection, there are various other solutions to assist in managing credit as we enter a particularly difficult and uncertain period for anyone providing goods or services on credit. Now is the time to reach out. Meanwhile, I will continue to channel my inner Annie Lennox and help to restore cash flow and preserve profit for those claims that fall on our desks.
Written by Jeff George | Head of Risk and Group Services