Another reason that we need to talk

Half of new businesses in WA fail

Kim Macdonald, The West AustralianUpdated February 13, 2012, 3:50 am

About half of all WA businesses collapse within four years of starting up, research has shown.

The figures from the Australian Bureau of Statistics reveal that of the 36,122 businesses that began in 2007-08, only 17,554 were still operating in June last year.

Chamber of Commerce and Industry economist John Nicolaou said the 48 per cent survival rate was not surprising, given the unusual trading conditions in the current economic climate.

Mr Nicolaou said labour, electricity costs and tax rates had increased and consumer confidence was still relatively low after the global financial crisis.

“Business has been dealt a double whammy in terms of difficult trading conditions in the market, and at the same time there are higher costs of doing business,” Mr Nicolaou said.

The figures show the survival rate was slightly better at 60 per cent when all businesses, not just new ones, were taken into account over the same four-year period.

Of the 211,745 businesses operating in mid-2007, 126,716 were still in business by the middle of last year.

In the four years to 2006-07, the survival rate was slightly better at 65 per cent.

The Retail Traders Association said shop owners were doing it tough because consumers were cautious.

Executive director Russell Zimmerman said the profit margin on products had dropped as retailers competed for customers.

“A colour TV that once sold for $1000, giving the retailers a 20 per cent margin, is now selling for $500,” he said.

“Even if the margin stays at 20 per cent, the profit is clearly lower.”

A raft of high-profile cafes and stores has recently closed, with many blaming high rents.

The Merchant Tea and Coffee House plans to move from Fremantle’s South Terrace coffee strip to another part of the port city, with chief executive David Briffa lashing out at high rents.

The clothing section of the Planet Video store in Mt Lawley will close amid complaints that rent at the landmark site doubled last year.

Subiaco’s 2XU sports store sent customers an email before closing last month, complaining about the high cost of running a business in Perth. 

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