Construction sector leads company collapses in QLD as insolvencies surge in March

Company collapses in Queensland have surged more than 20 per cent in March with the construction sector bearing the brunt amid warnings that financial headwinds will be worse than in GFC.

Company collapses in March soared more than 20 per cent in Queensland compared to the same time last year as the construction sector bore the brunt of unprecedented tough conditions.

Gold Coast-based Sunfox, which traded under the name Art of Home, and Sunshine Coast building firm National Construction Management collapsed, joining national construction businesses Porter Davis Homes, Lloyd Group and PBS amid warnings that the number of companies facing financial headwinds would be worse than during the global financial crisis.

Revive Financial’s Jarvis Archer said large construction insolvencies were still making headlines, reflecting very difficult conditions.

“Construction companies are approaching one in three insolvencies, after sitting at one in four during the pandemic, and one in five prior,” he said.

“It seems trading conditions will remain very difficult throughout the year, causing worrying insolvency levels and the potential for debt contagion, the knock-on effect of an insolvencies causing the failure of its trading partners.”

According to the Australian Securities and Investments Commission there were 104 administrations and liquidations in March, up 21 per cent from 86 in the same month last year.

It was also up 13 per cent on the 92 companies that collapsed in February, 2023. Over the March quarter, 234 companies collapsed, up 25 per cent from 187 the same period a year ago.

Other notable Queensland collapses in March were IG Energy Group, West End Craft Brewery Pty Ltd, trading as Parched Craft Brewery and Motorwagen Cafe and Restaurant in the CBD.

Parched brewery owner Carl Hallion.

Mr Archer said they were receiving more inquiries from stressed businesses with the hospitality sector behind construction and there has been a rising number in health services.

“‘We are a small business having a big financial crisis’. That’s the text message I received from a retail business owner this month. That sentiment has been repeated to me again and again,” he said.

Law firm Taylor David partner Scott Taylor said the number of companies facing financial headwinds was likely to be significantly larger than during the GFC.

“In many ways, what we’ve seen over the last six months is the tip of the iceberg,” he said.

“When you start seeing global banks getting anxious, being sold off or collapsing, it’s a clear indication of wider uncertainty, with more to come.

“What happens is that people become nervous and start selling down. Term deposits are generating a more certain yield than the stock market. Global markets have been struggling since the middle of last year, and they still have a long way to go. Consumer confidence has declined.”

WTC Advisory managing partner Anderw Weatherley said the surge in insolvencies was mostly driven by the impact of increased interest rates, inflation and energy prices, continued staff shortages and increased wages.

“I saw the recent announcement about the annual wage growth rising by 3.3 per cent in the December 2022 quarter, which will slightly less than the September 2022 quarter was still the largest since 2012,” he said.

“That shows the pressures business, especially small businesses are under in relation to employees. I do not see those factors decreasing any time soon. We have noticed a very real uptick in inquiry.”

Originally published as Construction sector leads company collapses in QLD as insolvencies surge in March