INSOLVENCY work is renowned for being lumpy, but Western Australia has seen its fair share of corporate collapses this year, with the administrators of Sons of Gwalia and Henry Walker Eltin featuring in reports.
The view of local insolvency practitioners, though, is that rising costs, environmental factors and the higher dollar may play a part in further insolvencies in the construction, agribusiness and export focused sectors.
According to statistics reported by the Australian Securities and Investments Commission (ASIC), the number of insolvencies registered in WA with the company watchdog in January was 93, with 105 in February and 116 in March.
At first these figures may look alarming, but Chamber of Commerce and Industry economist Nicky Cusworth said it was too hard to read any economic trend into the data, as any number of factors could affect numbers of insolvencies.
In November last year, the number was a six month high of 119.
But while the receivers are full of hope for embattled proprietors, they are anticipating more work from industries on the slide.
Shaun Fraser, a Perth partner at McGrath Nicol and Partners, which has creditors of failed construction firm Henry Walker Eltin as clients, said the firm was “actually very busy at the moment”.
He said the factors related to sector specific problems, rather than an overall indication of the state’s economic performance, citing the property sector as an example.
“The property sector is continuing to boom, but it’s a tough business and small builders will feel the heat of rising costs, I believe,” he said.
Mr Fraser added that two cases he had picked up in the last month were private companies.
Oren Zohar, a partner at Korda Mentha in Perth said the construction sector was under pressure.
“The trend is towards busier times ahead for insolvency practitioners. I think industries such as construction, transport and retail are likely to struggle over the next 6 to 12 months, as a consequence of higher fuel and labour costs and a slowdown in consumer spending,” Mr Zohar said.
But Geoff Totterdell from Price Waterhouse Coopers said the agribusiness sector was one to watch because of seasonality issues.
“We could see an unusually large amount from agribusiness as farmers face up to the drought.
“Exporters could also come under more pressure because of the higher dollar,” he said.
The related field of corporate restructure is also healthy at Ernst and Young, which played a cameo role in the administration of Henry Walker Eltin, according to Perth partner Martin Alciaturi.
Mr Alciaturi said that while the majority of their clients were well-placed at the moment, some companies were experiencing cash flow problems and raising more funds was being looked at in these cases.