Retail insolvencies exceed pre‑Covid levels, tipped to rise further this year

Retail insolvencies are running around 50 per cent above pre‑Covid levels, driven by cost pressures and changing consumer habits, CreditorWatch’s latest research shows.

According to the Retail Reshuffle report, retail insolvencies have risen steadily after a temporary reprieve during the pandemic support period and are now well above pre‑Covid levels (around 50 per cent higher). 

Inflation, higher interest rates and cost‑of‑living pressures have constrained household spending, the report explains, adding that discount‑led sales events such as Black Friday have permanently altered seasonal patterns. 

In addition, scale advantages are allowing larger retailers to consolidate market share at the expense of smaller operators.

CreditorWatch CEO Patrick Coghlan said the changes represent “a structural reset” rather than a temporary cycle.

“Consumer behaviour has fundamentally shifted, seasonal patterns have been rewritten, and the gap between large and small retailers is widening. For many smaller operators, the operating environment has become far less forgiving,” Coghlan added.

The report also finds that discretionary‑heavy segments, including clothing, footwear, department stores, furniture and smaller independent retailers, are showing the greatest strain. 

Food retailing and pharmaceutical retail remain comparatively defensive, but smaller operators are still seeing margin pressure.

Further pressure

Despite retail insolvencies being materially higher, CreditorWatch’s indicators suggest this trend is far from over.

Invoice payment defaults and ATO tax defaults, which are lead indicators of future insolvency risk, have reached elevated levels, according to the report.

“Higher interest rates are compounding the structural changes already being felt across retail,” said Coghlan. “With the post‑holiday period often a time of weaker spending, and cost pressures still elevated, retail insolvencies are likely to remain at or above recent levels in coming months.”

Colhoun suggested businesses should take a more active approach to credit risk, including monitoring credit ratings, invoice payment behaviour and ATO tax defaults.

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