The whims of government can be brutal for business owners. Whether it’s a halt of live beef exports or the constant to-and-fro around renewable energy, many companies are forced to include a high element of sovereign risk into their invenstment strategies.

With yesterday’s announcement of the closure of Hugo’s Lounge in King’s Cross, we see the impact on business as a result of knee-jerk reactions by a state government that prefers to play politics rather than address underlying social problems. While noone doubts the connection between violence and alcohol, or regards people who head out on a night of intentional drug and booze-fuelled fighting as anything but a blight upon society, complex issues require complex solutions.

 

 

It’s important to recognise than in attempting to defeat the few, we are in danger of affecting the many and, while we’re at it, ignoring broader issues across the community.

Let’s look at the facts. Yep - there’s no doubt that, as a result of the 1.30am lockout and broader intervention of King’s Cross, assaults in that suburb have fallen. These numbers tell a great story… if the only story you want to tell is that of the effect of a law on violence within a specific geographic boundary. Here are month-by-month numbers for assaults in King's Cross.

 

As Business Insider notes, there was a general downturn in violence during that period across New South Wales. Certainly it wouldn’t have been a stark as the numbers above, but is good news all the same. To be clear on our viewpoint, ANY reduction in violence is a positive.

However, statistics only provide value when their context is clear. Kings Cross Liquor Accord’s Chief Executive, Douglas Grant, further explains what has occured over the last 12 months. “When you have an 84% drop in foot traffic of course you will see a drop in assaults,” he told The Guardian.

The graph above shows there was an average of around 37 assaults per month in Kings Cross prior to the intervention, and now there are 25. Assuming the number of unreported assaults is consistent, this data represents a 33% drop over that time – a number that is inconsistent with the economic impact of the laws.

What we don’t know is what is happening outside of the CBD zone, and where the late-night crowd has moved. Are there now more assaults in Bondi or Newtown or Parramamtta as people are pushed out of the CBD? Also, who is watching The Star casino complex – a zone that managed to escape the laws that affect so many small business owners across the city?

 

 

This issue still has a long way to play out. Across the area covered by the CBD Lockout, it is unavoidable that more businesses will fail. The only question is, “Who is next?”