Thinking | 27 July 2022

Key turnaround and corporate renewal trends

Hall & Wilcox Partner Scott Butler discusses the significant impact inflation, rising interest rates, supply chain issues and the Australian Tax Office’s renewed collection of business tax debt will have on Australian businesses. He discusses the challenges ahead, especially for businesses that are struggling financially and may need turnaround or corporate renewal assistance.

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Scott Butler

[Transcript]

The Australian economy is coming into a really challenging period at the moment. Every day we’re hearing about inflation, rising interest rates, supply chain issues. Businesses affected by those issues, they’re going to struggle and that’s when we need to get involved to do turnaround work.

Global inflation and Australian inflation is very high. It’s being contributed to by a whole bunch of different factors, primarily soaring electricity prices, soaring food costs and that’s all causing businesses, when they’re buying things, it’s more expensive for them to buy their product, to manufacture something, to grow something. And if businesses are not able to pass those costs on to their end customers, it’s going to impact their margins and impact their profits.

Interest rates are increasing globally and it’s going to make it more difficult for businesses to service their current debt and borrow more money that they need in their businesses.

Thirdly, supply chain. It’s much more difficult for people to get their stock from overseas, and it’s more expensive. And that’s impacting businesses and we see that in specific sectors, we see that in the construction industry particularly.

The fourth key factor, I think, is what the ATO has started to do. So, the ATO was sitting there for two years not collecting, really, any tax debt because of Covid. And Australian businesses now are seeing the ATO start to collect that tax debt again.

So, we have these four issues which are really creating headwinds for businesses. And it really means that more businesses, I think, are going to be struggling financially and underperforming. So there are going to be more clients, potentially, who need our assistance to help them through those times. Some will really struggle to survive and we can help them with that.

There absolutely are danger points that clients need to look for: declining sales, declining profitability. You know, the sooner a director makes the decision to come and get some expert help the better the outcome will be, and the greater the prospects of being able to save their business.

Contact

Scott Butler

Scott is a leading commercial dispute resolution lawyer with over 25 years' experience in restructuring and insolvency.

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