Australia’s hospitality industry has been dealt a blow, with new data from CreditorWatch revealing one in 10 businesses in the sector closed their doors in the past year.

The credit reporting agency’s April Business Risk Index (BRI) shows the Food and Beverage Services industry is bearing the brunt of business closures and financial stress—ranking highest for insolvencies, late payments, and ATO tax defaults over $100,000

It’s a sign that ongoing cost-of-living pressures, reduced discretionary spending, and rising operational costs are pushing many small businesses in hospitality to the brink.

Construction and hospitality remain in the firing line

While the overall level of business insolvencies in Australia has started to plateau, insolvencies have remained high in Construction and Food and Beverage Services, which make up 40 per cent of all insolvencies in the past year.

CreditorWatch CEO Patrick Coghlan says the hospitality sector is especially vulnerable due to its reliance on consumer spending and thin margins.

“When households feel the pinch from interest rate hikes and inflation, they cut back on dining out. Add rising costs for wages, electricity, insurance, and food into the mix—and it’s a perfect storm,” says Coghlan.

South Australia hit hardest

The data points to South Australia as the state where hospitality businesses have been the most severely impacted, a trend likely driven by weak consumer confidence and soft business conditions. On the flip side, Tasmania has fared better, buoyed by a higher return to office rates and stable population growth.

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Late payments and cash flow concerns

Late payments continue to be a concern across all industries. On average, businesses waited 9.58 days past invoice due dates to be paid over the past year, putting extra pressure on already stretched cash flow.

Although there are signs that both insolvency and invoice defaults may be levelling off, CreditorWatch’s Chief Economist Ivan Colhoun warns that many businesses are still grappling with a “cost of doing business crisis”.

“Input costs have surged and demand is weak, especially for businesses dependent on discretionary spending,” says Colhoun. “The recent interest rate cuts and earlier tax relief may start to provide some breathing room in the second half of the year.”

Western Sydney businesses at highest risk

Regionally, Western Sydney stands out as the area with the highest forecast business closure rates—driven by high commercial rents, lower household incomes, and elevated personal insolvency levels.

In contrast, Norwood-Payneham-St Peters in Adelaide was identified as the country’s lowest-risk region, followed by areas in regional Victoria and North Queensland.

CreditorWatch expects insolvencies to remain high for at least the next six months, with future trends hinging on additional interest rate cuts and global uncertainty—particularly the economic fallout from the Trump administration’s tariff policies.

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