The businesses walking a tightrope in 2025

“According to our survey, approximately 86 percent of respondents predict stress in the construction industry. Similarly, 76 percent of respondents expect companies in the healthcare sector to face financial difficulties this year, while 75 percent of respondents were cautious about the outlook for the retail and consumer goods sector.”

Tracy said the collapse of private hospital operator Healthscope had highlighted the challenges the sector faces in coping with financial pressures, evolving care models and rising operational costs. Such factors, together with potential ripple effects on the public system, make the sustainability of private hospitals difficult.

In a report published in June, Alvarez & Marsal suggested it was time for private hospital operators and the owners of those assets to consider a more efficient approach, including new agreements with insurance companies and improvements to public-private partnership models.

Like healthcare, the construction industry faces structural problems, economic headwinds and declines in productivity.

This included the proliferation of project contracts in industry; This has left builders, from large-scale infrastructure contractors to small builders, with almost zero leeway to deal with material cost increases or delays.

“We have developed a model in this country where all risks are transferred from the manager of the project, that is, the government or some private party, to the main contractor,” Tracy said.

“The contracts are mostly fixed-price contracts and all the risk is transferred to that large contractor. This is a fatal flaw.”

“This is the main reason for the collapse of Probuild and Clough because there is no contingency or leeway for them to do when things go wrong.”

Retail is another sector that faces an uneven future despite a brighter overall economic outlook; The mid-sized ready-made garment industry, in particular, is in financial trouble.

Loading

“What we’re seeing in Australia is a shift towards either being at the top or at the bottom. If you’re in the middle, you’re lost.

Another factor likely to lead to business collapse next year, the survey found, was the taxman’s increasing aggressiveness in collecting debt from businesses because they were unable to pass on pensions, GST or pay-as-you-go deductions from staff wages.

Around $50 billion is owed to the government in unpaid taxes by businesses and individuals, according to ATO deputy commissioner Anna Longley.

“Our more lenient approach to payments during the pandemic has had an impact on the payment culture in society, where we continue to see some taxpayers not prioritizing the payment of ATO debts,” Longley told a meeting with tax practitioners last month.

“We expect more bankruptcies to occur for businesses that are not viable.”

The Business Briefing newsletter delivers big stories, exclusive news and expert insights. Sign up to receive it every weekday morning.