Media release: Australian restructurings and insolvencies expected to rise, says Clayton Utz R&I report

The firm's annual From Red to Black report analyses trends shaping the restructuring and insolvency (R&I) landscape in 2025, and points to growing financial distress in the construction, human services, resources, accommodation and food sectors in particular, all of which are facing increasing margin squeeze arising from a range of factors.

"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. 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."

From Red to Black highlights the new and emerging risks contributing to changing market dynamics such as the rise in private credit and the impact of AI.

"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," Ms Higgins said.  

"The potential scope of the transformative impact of AI creates further uncertainty, particularly as to what future workplaces will look like. Businesses are seeking guidance on how to prepare for a future that’s becoming harder to predict.”

Ms Higgins said that private credit is also reshaping the playing field.

"The continued growth in private credit is bringing both 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."

Looking ahead, Ms Higgins said the cumulative effect of these diverse pressures is likely to lead to a continued rise in restructurings and insolvencies over the next 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."

The From Red to Black report stresses the importance of early intervention. The businesses best placed to survive volatility are those which proactively assess financial health and take restructuring advice at the first sign of distress.

“Many boards are now asking: what does AI mean for our business model and workforce? What are the private credit alternatives if we need to refinance? How do we combat continuing sluggish growth on the homefront and lack of certainty around global trade abroad? These are the kinds of conversations that make a real difference,” Ms Higgins said: