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Australian business insolvencies are set to increase throughout 2025 due to renewed financial pressures.
Business insolvencies on track to spike in 2025, data reveals
07 March 2025
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7 minute read
The latest version of the Commercial Risk Barometer by Illion has revealed an increase in business insolvencies across Australia is to be expected over 2025.
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The barometer found failure risk rose in quarter four 2024 with the indexed analysis of 2.5 million active businesses included in Illion’s commercial bureau, undoing a significant recovery seen earlier in the year.
The barometer also outlined that despite business closures not yet surging to 2023 levels, failure risk was now 6 per cent higher than that period and is steadily creeping towards 2023’s peak.
The Commercial Risk Barometer tracks the probability of Australian businesses failing within 12 months based on levels of financial stress.
Barrett Hasseldine, head of modelling at Illion, said although the overall business environment may have appeared steady, early warning signs of financial stress were emerging, even in industries previously considered ‘stable.’
“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,” he said.
“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.”
According to the barometer, the number of businesses at “very high risk” of failure increased by 1.3 per cent in Q4 2024 – nearly double the net growth rate of new businesses entering the market.
Businesses at “severe risk” of failure surged by 3.7 per cent, which lent to the prediction that insolvencies could rise by 2 to 3 per cent in 2025 if the trend persisted.
Traditionally low-risk industries – financial services, insurance, utilities and education – were found to be under an increased amount of pressure, based on the data.
The data found the biggest quarter-on-quarter jump in risk changes were 2.3 per cent in financial services, 1.6 per cent in education businesses and 2.4 per cent in utilities businesses.
For Q4 2024, failure risk reached 4 per cent for education, 9 per cent for utilities and 2.6 per cent for financial services.
Hasseldine said business risk was spreading to industries previously insulated from economic downturns, while some sectors had improved, which demonstrated the inconsistency of the economic recovery.
“We’re seeing an unexpected shift in the business landscape. Some industries are bouncing back, while others are just starting to feel the squeeze,” he said.
“It’s a mixed bag – construction is finding its feet, but finance, education, and utilities are slipping. The message for business leaders is clear: now is not the time to assume smooth sailing. Businesses need to remain cautious and monitor their trading partners closely.”
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