From Red to Black 2025

Insolvencies in Australia have continued to rise in 2025, with signs of deeper and long-term stress – although lower interest rates and inflation may ease the pressure for some sectors through to year end.

While individual sectors face unique challenges, broader economic conditions are a key part of the story. Geopolitical volatility and shifting global trade policies are weighing on business confidence, while domestic factors are also taking a toll. Stubbornly high cost bases contribute to margin squeeze, with distress felt most notably in the construction, mining and accommodation and food services sectors. Meanwhile, varying forecasts of scale and timeframes for AI deployment, and of its transformative impact, create further uncertainty – particularly about future workforces, unemployment rates, and flow-on effects for consumer confidence.

Having worked with our clients on some of the most complex and innovative mandates in the industry, we've seen these first-hand, and some of those have inspired From Red to Black, our annual review of significant developments shaping the Australian restructuring and insolvency market.

We begin with a broad overview of the leveraged market forces shaping the evolution of restructuring and insolvency in 2025 and what they mean for businesses, insolvency practitioners and investors. The growth of one of those market forces we identify, private credit, also has major structural differences to traditional lending, presenting a game-changer for lender dynamics in restructuring and insolvency situations, and we explore how these dynamics may play out.

Two sectors under stress also demonstrate the impact of those forces. Uncertainty in mining royalties in distressed situations is gaining more attention, but with little legislative guidance. Meanwhile, significant building reforms to improve standards will have flow-on effects in insolvency.

Finally, we focus on the role of the insolvency practitioner. The fundamental need to maintain independence currently is under the spotlight in Australia’s safe harbour regime, but AI in restructurings and insolvencies promises to keep it there, along with its potential economic benefits.

One key lesson is clear: early and proactive engagement is critical for stakeholders amid ongoing volatility and increasing stress. Those who engage in proactive contingency planning and leverage strategic advantages will be in a position to maximise value in restructuring and insolvency scenarios. We hope our exchange of ideas will help you do that, and look forward to hearing your views on these, or other, topics of interest across this interesting space we all work within, and look forward to continuing to support you in the year ahead.

– Katie Higgins, Head of Restructuring and Insolvency