Construction Companies Struggling

Following our article last month about the new Builders Warranty insurance arrangements there has been some amazing statistics from ASIC with regard to Australian building companies.

Rates of insolvency in Australia for building and construction companies has increased dramatically in the last 12 months. Of the total corporate bankruptcies 22% have been in the building and construction industry.

ASIC recorded more than 1800 insolvencies within the Australian construction industry in 2014. This is compared to 472 insolvencies in the Manufacturing Industry and 218 in the Agriculture Industry.

Managing Director of Atradius, a leading Credit Insurance provider, Mark Hoppe said recently “The construction industry is notorious for stretching terms of payment, which puts pressure on the smaller players and ultimately leads to a high rate of failure”.

In March there were 30 building companies that collapsed, with 33 in April, 51 in May, and 63 in June. Profit margins have continued to shrink down to between zero and 2 per cent. We do not yet have the full July figures, but based on what was happening in June, the figure will be well above the June number.

The new arrangements in regards to Builders Warranty have had and are having a positive effect on consumers at the lower level, there is little protection for corporate consumer and sub-contractors who have lost the most in these collapses.