Hospitality insolvencies have surged by over 40 percent between December 2023 and December 2024, according to a new report from Equifax.
The Equifax Quarterly Commercial Insights – December 2024 report found that the sector has also seen a spike in auto loan arrears rates, up 43 per cent since December 2023. Meanwhile, overall business credit applications decreased by 3.2 per cent.
“The declining appetite for business credit, and the considerable drop in asset finance applications in particular, suggests that many businesses are hesitant about borrowing and investing in capital. This is another indicator of low business confidence, which remains well below average levels according to recent reports,” said Equifax General Manager Commercial and Property Services Scott Mason.
Small and medium-sized enterprise (SME) credit arrears have doubled since December 2023, and SME and sole trader demand for credit cards has grown by 13 per cent in the same time.
“The concurrent increase in SME personal credit applications and arrears is a potential red flag. SMEs and Sole Traders, particularly those working in industries facing high insolvencies and difficult market conditions, could be struggling to get commercial finance and instead are turning to personal lines of credit to support their businesses,” said Mason.
Industries with younger demographics, including hospitality, also appear to be relying more on unsecured credit to combat financial stress, according to the Equifax Quarterly Consumer Credit Insights report.
“Retail and hospitality workers, particularly those aged between 18 and 35, are increasingly reliant on unsecured credit. Concerningly, this cohort is also showing higher delinquency rates, which suggests they are not only relying on credit for daily expenses but also falling behind on payments,” said Equifax General Manager Advisory and Solutions Kevin James.
Despite the recent interest rate cut, Equifax’s modelling predicts it could take up to nine months for Australians to notice a difference.
Equifax is a global data, analytics, and technology company. The full Equifax Quarterly Commercial Insights – December 2024 report can be found on its website.
Photography by Helena Lopez.
Laura Box
