Victorian construction failures reach new high as figures show 619 businesses have gone

Insolvencies in the Victorian construction sector spiked 74 per cent in the past year alone and builders say the tough times will continue. See the list.

Company insolvencies in Victoria’s construction sector have spiked 74 per cent in the past year alone and more builders are expected to fail before the tough times end.

The latest ASIC data reveals 619 Victorian building companies collapsed over the past year, as insolvencies in the construction industry soared nationally.

Builders Collective of Australia president Phil Dwyer said builders were grappling with the biggest crisis to face the industry in his 40 years of experience.

“It’s never been this bad,” he said.

“These fixed-price contracts and numerous issues we can relate to Covid, the escalation of costs, supply chain problems and the increase in timber and steel have had a dramatic effect.

“We’re seeing an increase in the cost of building by about 30 per cent and none of these contracts can withstand that sort of increase.”

Like Mr Dwyer, Master Builders Victoria chief executive Michaela Lihou expected more company failures over coming months but said the industry continued to be strong and resilient.

“While we’re alert to the recent spike, we’re not alarmed,” she said. “It’s less than 1 per cent of the businesses in the Victorian building and construction industry that have gone insolvent.”

The latest ASIC insolvency statistics show the number of Victorian construction companies entering external administration was up 73.9 per cent in the 12 months to June 30 compared with the previous year.

There were 619 building-related company failures last financial year in Victoria.

The only other state with worse figures was New South Wales, where construction insolvencies leapt 91 per cent to 981.

Ms Lihou expected industry conditions to improve.

“A lot of the pressures the industry was facing with regards to supply shortages and the price increases have dissipated and started to normalise, so that provides more certainty for builders when they are costing jobs,” she said.

The construction industry had by far the highest number of insolvencies of any sector nationally, with 2211 companies entering external administration – up 72 per cent.

Melbourne-based home builder Porter Davis led the high-profile collapses when it was placed into liquidation in March.

Victorian home builder Mahercorp, the parent entity of Melbourne builders Urbanedge Homes and Eight Homes, called in administrators in April but avoided collapse when creditors and customers backed a rescue plan.

Outside of construction, Victoria’s high-profile company collapses include fine-dining restaurant meal delivery platform Providoor which went into liquidation in May.

Victoria overall had 2142 insolvencies for the financial year, up 64 per cent, led by construction, and the food and hospitality sectors. In top place was NSW with 3283 company failures, which was up 72 per cent for the year.

Nationally, 7943 Australian companies across all sectors went into a form of external administration for the first time in 2022-23, up from 4912 in 2021-22, and the highest number of business failures since 2018-19.

The number of insolvencies dipped to as low as 4235 during the height of Covid-19 in 2020-21, when temporary measures were put in place by the Morrison government to protect vulnerable businesses from the economic shock of the pandemic.

However with the safety net removed, and the economy slowing in the face of rampant inflation and rapid fire interest hikes by the Reserve Bank, businesses in industries ranging from construction to hospitality and retail are in a battle for survival.

 

Originally published as Victorian construction failures reach new high as figures show 619 businesses have gone