Construction suffers high churn rate
Construction was the principal source of business churn in Australia from 2008-2012, with more than 400,000 company births and deaths, according to a global survey by RSM International.
The report, Rebuilding the Global Economy, examined enterprise births and deaths in Australia, the UK and the US, and noted that construction is the leading source of enterprise births in Australia. However, in concert with the US, new construction companies exhibit low survival rates.
From 2008-2012, Australia registered 1,223,607 enterprise births, of which construction companies comprised 17.2 per cent, and 1,153,687 deaths, 18.4 per cent of which were in construction.
Overall, RSM reported that Australia’s net rate of business creation grew by just 0.4 per cent in the year to 2013, with 9000 companies being created.
In 2008-09, there was a divergence of enterprise births and deaths, with net company formation of more than 74,000 companies. Rates then converged on a downward trend, with new company entries marginally surpassing exits between 2010 and 2012.
RSM said that, notwithstanding an economic environment with interest rates falling to historical lows in the first quarter of 2013/14, it’s expected there will be a continuing decline in net business creation. This results from continuing pressure of high operating costs for most Australian businesses.
In its report, RSM said growth differences between countries demonstrate the impact of country-specific legal, regulatory, institutional and cultural factors influencing enterprise births and deaths. RSM’s analysis further suggests that well-targeted government interventions can boost the survival rates of start-up companies.