Chaos as 2,300 construction companies go bust – and the ‘perfect storm’ of reasons why
As many as 2,349 construction companies have gone bankrupt in the past year – with fears that more may soon fall.
A 'perfect storm' of high interest rates, rising material costs and an ongoing labor shortage in the Australian industry has sent tradies into freefall.
The number of bankruptcies in the construction sector has reached an annual record this year, according to new data published by regulator ASIC.
The September quarter was the worst for the sector in 2023, when 785 construction companies went bankrupt.
Just this month, four construction companies went bankrupt in the first three days of the month.
A 'perfect storm' of high interest rates, rising material costs and an ongoing labor shortage in Australian manufacturing has sent tradies into freefall
Just this month, four construction companies went bankrupt in the first three days of the month
However, Master Builders Australia CEO Denita Wawn remained positive on the sector.
She said: “It is reassuring to see that businesses have remained resilient despite the volatility in the building and construction sector over the past financial year.
“It's been a challenging time for some companies who have been caught in the perfect storm of rising material prices, labor shortages and rising interest rates while locked into fixed-price contracts.”
In the broader economy, bankruptcies have risen 31 percent since 2022, with the construction sector accounting for the lion's share of bankruptcies.
Of the year in which 8,471 companies went bankrupt, almost 28 percent occurred in the building and construction sector.
And amid a chronic housing shortage, fueled by Australia's record influx of overseas migration, the collapse of builders, contractors and subcontractors will not only have an immediate impact but could also limit the future supply of new homes.
Business bankruptcies are piling up
A series of high-profile bankruptcies have rocked the construction industry since November 2021.
BA Murphy, Condev Construction, Oracle, LDC, ProBuild, Pivotal Homes, Hallbury Homes and Warren Homes are among the victims.
Porter Davis, one of Australia's largest housebuilders, collapsed in March this year with 1,700 homes under construction in Victoria and Queensland. Another 779 prospective homeowners had signed contracts with construction yet to begin. The company's 470 employees were left without work, while 1,000 unsecured creditors were left with a combined debt of $71 million.
Most recently, Queensland-based W3D Construction went bankrupt, leaving creditors owed almost $1.3 million and a sports pavilion project at Brisbane's prestigious The Southport School still under construction.
The number of bankruptcies in the construction sector has reached an annual record
In a separate case, a series of companies in the furniture and building products industries under the umbrella of the GDK Group collapsed into liquidation with cumulative debts of more than $45 million.
Dome Building Projects, which completed custom construction and renovation work in Melbourne's eastern suburbs, went into administration in October after failing to make payments to the company's former director.
New companies are not deterred
However, despite the record number of construction company bankruptcies, many companies are established in the sector.
A total of 73,405 construction companies ceased operations in the twelve months to June 2023, but 73,013 new companies also joined the sector during that period, figures from the Bureau of Statistics show.