Tuesday, January 18, 2022

Food and beverage among industries most at risk of default

Credit reporting bureau CreditorWatch has revealed the top three industries with the highest number of payment arrears in November.

Construction takes the top spot with 12.6% of firms in arrears by 60-plus days. This is closely followed by the food and beverage sector at 11.1%. Transport, postal and warehousing is in third place with 10.7%.

Commenting on food and beverage, CreditorWatch says as restrictions ease across Australia, demand for consumer services (including the hospitality sector) are “soaring”, with consumer sentiment suggesting people are feeling confident about spending almost $200 billion accumulated in pandemic savings. Retailers saw over $8 billion in Black Friday and Cyber Monday sales late last month, boosting the postal and warehousing sector.

However, CreditSource CEO Shavantha Mallawa Coghlan says he doesn’t expect to see this to be reflected in payment default data – a leading indicator that a business is in financial difficulty – until 2022. 

“A turnaround is definitely on the cards, but this will take a little while to bed in and reverse the damage inflicted by the pandemic,” he says. 

“With this in mind, we must watch out for the return of zombie businesses – those that have clung on during the pandemic and are now dazzled by bright reopening lights but who won’t be able to successfully trade their way out in a post-lockdown world.”

While online shopping activity may have supported the transport, postal and warehousing sector to some degree, CreditorWatch says the knock-on effect for suppliers from the “strangled” accommodation, food and beverage sector has meant there’s been little to no demand for delivery service outside of takeaways. 

“The transport, postal and warehousing industry will be a key indicator of Australia’s post-lockdown world as it’ll be a sign that all layers of the economy are whirring again, and the supply chain is firing on all cylinders,” says Mr Coghlan. “Businesses have an opportunity to prepare so they can take full advantage of the opportunities ahead.”

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