Australian businesses are expected to face mounting financial pressures in 2025, with insolvencies likely to rise, according to the latest Commercial Risk Barometer from illion, an Experian company.
The report found that business failure risk increased in the fourth quarter of 2024, reversing much of the recovery seen earlier in the year. Although closures have not yet reached 2023 levels, failure risk is now 6% higher than during that period and is approaching the late 2023 peak.
The analysis highlighted a 1.3% rise in the number of businesses at very high risk of failure – nearly double the net growth rate of new businesses entering the market, which stood at 0.7%. Meanwhile, businesses classified as at severe risk saw a 3.7% increase, suggesting insolvencies could climb by 2% to 3% in 2025 if the trend continues.
Barrett Hasseldine, head of modelling at illion, said that while business conditions may appear stable on the surface, early signs of financial stress are emerging, particularly in sectors that had previously been seen as resilient.
“At first glance, it may seem like business conditions are improving – but look a little closer, and you’ll see cracks appearing beneath the surface. Failure risk is quietly rising, and we’re seeing businesses that once seemed resilient now starting to struggle. It’s like walking on thin ice: some companies will make it across, but others are going to fall through,” Hasseldine said.
The report highlighted a shift in financial strain, with some previously stable industries now at higher risk. While sectors like food services, retail, and construction remained steady in Q4, failure risk rose in financial services, education, and utilities.
Failure risk in financial services increased by 2.3% – three times the national average – alongside a rise in overdue invoices. Education businesses saw a 1.6% rise, impacted by tighter household budgets and lower migration. Utilities businesses faced a 2.4% increase, driven by fluctuating energy prices and greater consumer price sensitivity.
Even established businesses within these sectors struggled, with failure risk rising by 4% for education, 9% for utilities, and 2.6% for financial services firms during the quarter.
Still, some sectors showed signs of resilience, such as the construction, mining, and telecommunications industries. Although these improvements suggest areas of stability, Hasseldine cautioned that the broader economic recovery remains inconsistent, which means businesses should continue to monitor financial risks closely.
“We’re seeing an unexpected shift in the business landscape. Some industries are bouncing back, while others are just starting to feel the squeeze. It’s a mixed bag. The message for business leaders is clear: now is not the time to assume smooth sailing,” Hasseldine said.
