Building sector leads insolvencies in 2021-22 as high profile firms fall

Almost 4000 Australian companies went bust over the past 12 months as experts say rising inflation and interest rates could force more to the wall. See the full list of collapses.

Thousands of Australian companies collapsed in the last financial year marked by a string of high profile construction company insolvencies and with interest rates and inflation on the rise there are expectations of a wave of failures in 2022-23.

In the last 12 months the construction industry suffered a perfect storm of conditions, including supply chain disruptions, skilled labour shortages, skyrocketing costs of materials and logistics and extreme weather events.

Household names such as Probuild, Privium, BA Murphy, Condev, ABD Group, Waterford Homes and Pivotal Homes were just few of the building sector’s casualties in the last 12 months.

Across all sectors in Australia in 2021-22 there were 3917 liquidations or administration appointments. The biggest number of collapses was in NSW at 1536, followed by Victoria with 1022 and Queensland at 665. That was followed by 350 for Western Australia, 196 for South Australia, 91 for ACT, 29 in Tasmania and 28 in the Northern Territory.

Equifax head of product and rating services Brad Walters said creditor wind-ups have triggered the majority of insolvencies, and the construction sector has grown to represent 28 per cent of all Australia-wide insolvencies.

“Small-scale operators in Australia’s construction industry could well be the canary in the coal mine for the difficulties that lie ahead for this sector,” he said.

“Rising rates of construction industry insolvencies and cost of living pressures continue to place a heavy financial burden on sole traders and small business owners.”

Workers leave the Probuild worksite at Queen Street, Brisbane. Picture: Zak Simmonds

WCT Advisory managing partner Andrew Weatherley believes inflation and interest rate rises will trigger more insolvencies in 2022-23.

However, he said it will take several rate rises before it really impacts businesses and that probably won’t happen until the middle of next year.

“I’m advised that banks and smaller financiers have started to issue their notices of default and in particular from private lenders moving certain borrowers to default interest rates,” Mr Weatherley said.

“This will increase the pressure on borrowers and start to eat into equity of any property/assets held but I still think it will take several months before that has a significant impact on insolvency numbers.”

Mr Weatherley said businesses will increasingly suffer from a more proactive ATO and banks, increasing prices, increasing interest rates, falling consumer confidence and lower asset values.

“The bottom line is that I think pain is coming but it will still take several months before those factors have a significant impact on insolvency numbers,” he said.

Mr Weatherley said he expected the ATO to stake a stronger stance in 2022-23 to collect about $32bn in tax debt.

According to the Australian Bureau of Statistics in March, 22 per cent of businesses said it was difficult or very difficult to meet their financial commitments in the next three months.

“I understand that the ATO will issue further warning letters later this calendar year and start taking a more aggressive approach,” he said.

“I know myself of several leads where we have recommended liquidation because the business is not viable but the director is hanging on waiting for a trigger.”

Originally published as Building sector leads insolvencies in 2021-22 as high profile firms fall