Economic downturn wiped out one in three start-ups

Nearly one in three Australian businesses that started up at the start of the global financial crisis shut up shop by June last year, new figures have revealed.

A report by the Australian Bureau of Statistics shows that 316,867 start-ups launched in 2007-08. By June 2009, just 226,388 of these businesses had survived.

The sector with the worst start-up survival rate during this two-year period was public administration and safety, with just 65% remaining.

Administrative and support services, arts and recreation and construction also fared comparatively badly while businesses in mining, retail and accommodation were the most likely to survive.

There were 14.4% more start-ups in 2008-09 than a year previously, although this was the lowest level of annual growth since the ABS begun compiling the report in 2003.

Overall, the ABS figures show that more than 500,000 Australian firms went out of business during the downturn, from 2.074 million in 2007 to 1.525 million last year.

Business failures were slightly higher in Western Australia and Queensland, with 57,000 and 117,000 fewer businesses in each state, respectively.

In NSW, there were 185,000 fewer businesses in 2009 than two years earlier while Victoria shed 133,000 firms.

The downturn appears to have hit sole traders and small businesses, with between one to four employees, the hardest.

There was a 67.8% two-year survival rate among sole traders that started in 2007, with 79.9% of firms with one to four members to staff got through the same period. By comparison, 86.5% of firms with more than 20 employees survived the same period.

The full ABS report can be viewed here.