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Company insolvencies hit eight-year low

AAP logoAAP 20/12/2016

The number of Australian companies to fall into insolvency this year has declined to an eight-year low, in a positive sign for the economy.

In the first 10 months of 2016, 7,365 companies slipped into voluntary administration, liquidation or receivership - 1,300 fewer insolvencies compared to the same period a year ago, new figures from FTI Consulting show.

The count is the lowest since 2008, FTI's analysis of insolvency statistics from the Australian Securities and Investments Commission has found.

In October, 677 companies went into external administration, a five per cent drop on September's figures.

FTI Consulting head of corporate finance John Park said the downward trend in insolvencies reflected better economic conditions, which are expected to continue in early 2017 despite the country's negative gross domestic product growth in the September quarter.

"Declining receivership appointments, as well as anecdotal evidence, suggests a continued reluctance by the banks to appoint," Mr Park said.

"Banks are working closely with their clients when problems are identified, as formal engagements are no longer a preferred option when defaults come into play."

He said the retail and mining sectors continue to suffer, with high-profile retailers Pumpkin Patch, Payles Shoes and Howards Storage World all recently failing financially.

GDP declined 0.5 per cent during the September quarter with annual economic growth slowing to 1.8 per cent, the slowest rate of growth since the global financial crisis.

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