Tasmania building industry: Inside a sector being pushed to the wall

Tasmania’s construction bosses say it’s harder than ever to make a crust in the industry, while the conduct of banks is exacerbating issues. But a new program hopes to stem the bleeding.

Declining profits, late and missing materials and chronic uncertainty: step inside a Tasmanian building and construction industry on edge.

The sector is punch drunk from the twin uppercuts of Covid and the Ukraine war, leading to a broken supply chain and ballooning costs, which have been exacerbated by a lack of support from banks.

In the three weeks to August 21, 145 Australian building and construction companies entered external administration across the nation, compared to just 56 in the same three weeks in 2021, ASIC data shows.

A total of 346 companies in the sector entered external administration between August 21, 2021–August 21, 2022.

The issues are known all too well by insolvency expert Shelley-Maree Brooks, of Hobart and Launceston firm Rodgers Reidy.

“The main recurring issue I see cropping up in collapses in the construction sector is underquoting and locking in fixed-price contracts,” she said.

“Most business owners seem to forget to take into account cost to cover their fixed costs, for example rent, if they have a showroom/office, power, insurance, et cetera.

“In recent months there seems to have been a bit of a shift in quoting, particularly due to the rise in cost for materials; however, whether this has still been enough to cover those fixed costs is yet to be seen.

“These changes are also going to be too late for some whether they already had significant contracts on foot that they can’t change.”

In response to the industry’s parlous position, Rodgers Reidy is hosting a two day Hobart event starting Wednesday, ‘Construction Sector F2F Financial Masterclass’, in an attempt to arrest the slide.

Rodgers Reidy director Shelley-Maree Brooks. Photograph: Eddie Safarik

The event will feature a litany of professional advisers, include bankers, accountants, lawyers, financial and business advisers, who will all give presentations and field questions on how to ride out the storm wracking the industry.

One attendee will be CBC Custom Building’s Brad Goodwin.

Mr Goodwin told the Mercury his business’ “biggest concern... is the unknowns, we can’t work towards a structure anymore”.

“Everyone is under same amount of pressure in different ways, volume builders are really feeling the pinch,” he said.

“A bit of material moves and you’re instantly in the red.

“People are working harder than ever to break even.

“Outside voices are saying you must be killing it at the moment, it’s pretty hard to swallow because it’s the opposite.”

Mr Goodwin said he has transitioned most of his jobs to a “cost plus” contract as opposed to fixed-price in response.

“We are asking for a smaller profit margin than we normally would, a 20 per cent margin down to about 10 per cent but knowing we will definitely walk away with that 10 per cent,” he said.

However, contracts such as that earn the ire of banks – “they won’t come at that”, Mr Goodwin said.

Another attendee, Driftwood Workshop’s Mike Fitzgerald, also called out banks for their lack of support for the industry.

“Big banks need to change their policies. If you have a delay on materials due to things being out of your control, you can’t deal with the progress claim,” he said.

“If you have two or three payments not coming through, you have companies of 30 years going under.

“It becomes quite stressful at times, juggling finances.”

Originally published as Tasmania building industry: Inside a sector being pushed to the wall