Firm says industries experiencing pressures include construction, human services, resources, food
Australian law firm Clayton Utz’s annual “From Red to Black” report on restructurings and insolvencies (R&I) expects the country to keep seeing rising insolvency rates and signifiers of deeper and more long-term financial distress across several sectors this year.
However, the firm noted in a media release that lower interest rates and inflation could relieve pressures that certain sectors are experiencing until the end of the year.
The firm’s annual R&I report discusses the trends influencing the landscape this year and the new and emerging risks leading to market dynamics shifts, including the increase in private credit and the effects of artificial intelligence (AI).
Clayton Utz released its 2025 report in the context of the geopolitical instability around the world and the persistently sluggish growth in the country.
“Geopolitical volatility and the unsettled position around global trade have started to weigh on business and consumer confidence, while domestic factors are also taking a toll,” said Katie Higgins, Clayton Utz’s head of restructuring and insolvency and Sydney-based partner, in the media release.
The annual R&I report noted rising economic pressures among the construction, human services, resources, accommodation, and food sectors. The firm’s research revealed that these sectors have been dealing with an increasing margin squeeze from various factors.
“Individual sectors face their own unique challenges, but across the board we're seeing the fallout from rising costs, labour shortages, structural changes driven by technology and increasing compliance obligations,” Higgins said in the media release.
The report then addressed the possible scope of AI’s transformative impacts, which Higgins said was adding even more uncertainty regarding the future of workplaces.
“While there are varying forecasts around the scale, timing and impact of AI adoption, it's clear that AI will be a significant force for change in how workforces are constituted in the future – with potential flow-on effects for consumer confidence as a result,” Higgins said in the media release.
Higgins noted that organisations have been searching for guidance on possible ways to get themselves ready for an increasingly unpredictable future.
Next, regarding private credit, Higgins said the continuing growth in private credit has been transforming the playing field by adding opportunity and complexity.
“Alternate credit providers are stepping into deals traditional banks may not be willing to finance, which is creating more competitive financing and restructuring environments but also more complicated lender and intercreditor dynamics when conditions worsen,” Higgins said in the media release.
In conclusion, Higgins expected that the cumulative impacts of these various pressures would continue to increase R&I in the coming 12 months.
“These factors, from geopolitical upheaval, to technology disruption, to diversifying credit sources and continued rise of private capital, are creating a complex landscape for Australian businesses,” Higgins said in the firm’s media release.
Emphasising the need for early intervention, the report noted that businesses could be better positioned to withstand unpredictability by proactively analysing their financial health and seeking restructuring advice as soon as they spotted financial distress.
Higgins suggested asking the following questions at the board level to make a genuine difference:
