Canberra business collapses crisis prompts chamber of commerce to call urgent meeting

An urgent meeting is set to be held in Canberra in the next three weeks in an attempt to counter the territory’s high business insolvency rate.

The Australian Capital Territory had the lowest business survival rate of any Australian state or territory between 2008 and 2012, with 42 ACT businesses collapsing in the last quarter.

The ACT and Region Chamber of Commerce and Industry, Andrew Blyth, told SmartCompany the meeting will provide an opportunity for businesses to share their experiences first-hand and assist in developing improved policy options to take to the government.

“In the short time I’ve been chief executive there’s been a number of situations brought to my attention, namely that we have the lowest business survival rate in the country and there has been an increase in liquidations in the past 12 months.

“Calling an election in January hasn’t helped. We need the election to take place sooner rather than later and a drop in interest rates from the Reserve Bank of Australia to help boost consumer confidence,” he says.

Blyth says the ACT government only allocates 0.02% of its budget to business and industry development and says despite the ACT recording an unemployment figure of 3.7%, this number disguises the fact full-time employment figures have dropped and female unemployment has risen from 3.2% to 3.9%.

“Since January, the wallets have stayed in backpockets and purses have stayed shut because people have cut back on discretionary spending,” he says.

Blyth says phone calls to the chamber had increased six-fold this year from businesses asking about downsizing and employee entitlements for redundant workers.

Council of Small Businesses of Australia executive director Peter Strong, who was the owner and operator of a small business in Canberra until recently, told SmartCompany the insolvency rate has a number of causes.

“It depends on the sector, but retail businesses are suffering because of planning issues and poor consumer confidence,” Strong says.

“There is also far too much retail space in Canberra, the competition is some of the highest in Australia.”

Strong explains the urban layout of Canberra favours big business.

“All the car parks are for the big shopping malls. A lot of the small businesses have been shoved out to the edges and consumers have to drive out to these businesses,” he says.

Strong says a growing number of consumers are buying online instead of travelling to their local small businesses.

“Retailers also have the issues of landlords pushing the rents up.”

“Construction is an interesting area too, the government has put a lot of effort into building units and apartments for years, and for a long time there was a housing problem, but this is a cyclical thing,” he says.

The housing boom in Canberra started unwinding towards the end of 2011 and this has resulted in construction companies being placed under pressure, with many collapsing.

Of the 87 businesses placed in external administration in the 2011/2012 financial year, 20 of them were construction companies, according to Australian Securities and Investment Commission figures.

While the construction insolvency figures are particularly high, consistently making up one-fifth of the insolvencies per year, the sector is accounts for one-fifth of active businesses  in the ACT.

A spokesperson for ACT Economic Development Minister Andrew Barr told SmartCompany the ACT economy is “heavily influenced by the Commonwealth” and its contraction in spending and employment has impacted upon the retail and construction sectors, but says in not a territory-specific problem.

“The slowdown in retail is apparent right across Australia. As such, there are several factors at work that are beyond the scope of the ACT government to control.

“Andrew Blyth is correct that we have the lowest business survival rate from 2008 to 2012.  However, we’re not significantly lower than the average,” the spokesperson says.

The spokesperson says of the 24,825 businesses operating in the ACT at the end of 2007-08, 59% were still operating at the end of 2011-12.  Nationally, the survival rate over the same period was 61.8%.

“But that’s not necessarily the whole story – over the same period, the total number of businesses operating in the ACT grew by 3.2%, whereas nationally the growth rate was only 2.9%.

“In a market economy, it is not a good use of taxpayers’ money for governments to prop up insolvent businesses – in other words we can’t keep afloat a business which would otherwise fold,” the spokesperson says.

The spokesperson says the ACT government is continuing to try and support small businesses and last year it abolished the commercial land tax, lowered payroll tax and began phasing out insurance tax and stamp duty.