Beaurepaires, Australia’s oldest tyre retailer, is the latest business set to close its doors this year and an expert has warned it won’t be the last.
The iconic retailer is set to close 100 stores and lay off 700 workers after plans to sell the business to rival Bob Jane Corporation were reportedly unsuccessful.
It’s not the only iconic business that has folded this week. South Australia’s popular Morris Bakery appears to have shut its doors after nearly 80 years in business, while Sydney nightclub The Carter was placed into liquidation on Monday.
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Just last week, vacuum cleaner retailer Godfreys entered voluntary administration after more than 90 years in business - with nearly 200 jobs lost - citing cost-of-living pressures and inflation as the reasons behind its collapse.
CreditorWatch chief economist Anneke Thompson expects the first half of this year will continue to be “particularly challenging” for businesses, with more companies expected to collapse.
“High interest rates are having an impact on a lot of sectors, particularly the retail sector and construction are still very much being impacted by high borrowing costs,” Thompson told Yahoo Finance.
“There’s also lower demand in a lot of areas right now. There are less houses being built, less discretionary spending. So, that is impacting a lot of retailers and construction companies as well.”
According to the company's latest Business Risk Index, almost every sector has seen double-digit increases in the rates of business failures across 2023. It expects business failures to increase to 5.8 per cent over the next 12 months.
Food and beverage businesses hit hard
Businesses in the food and beverage sector were being hit particularly hard, Thompson noted, as we see demand from consumers start to fall.
“That will make the first six months of this year in particular, while interest rates remain high, very difficult for restaurants and cafes,” Thompson told Yahoo Finance.
“They are grappling with high rents, high electricity [and] gas prices, [and] labour costs. Food pricing might be plateauing a little bit but [it’s] still much higher than [it] used to be. And then, if you add that to falling demand, less people eating out at restaurants, it makes trading very difficult in that sector.”
The Reserve Bank is expected to start cutting interest rates in the second half of this year, but Thompson said it may take another nine to 12 months for discretionary consumer spending to recover.
“Even when interest rates do eventually fall, people aren’t going to go out and party and spend up big,” she said. “Cost-of-living pressures are going to be such that interest rate relief will go towards paying an electricity bill or paying for essential items.”