Building and construction industry insolvencies soar to record levels

The brutal reason behind 2,300 tradie companies going bust has been laid bare.

A staggering 2,349 constrcution firms have collapsed in the past year - with fears more may fall soon.

A “perfect storm” of high interest rates, soaring material costs and an ongoing worker shortage across the Aussie industry have sent tradies into freefall.

Insolvencies in the construction industry have reached an annual record this year, according to fresh data published by the corporate regulator ASIC.

The September quarter was the worst for the industry in 2023, where 785 construction businesses traded as insolvent.

Just this month four building companies went bust in the first three days of the month.

However, chief executive of Master Builders Australia Denita Wawn remained positive about the industry.

She said: “It’s reassuring to see that businesses have remained resilient despite the volatility experienced within the building and construction industry over the last financial year.

“It has been a challenging time for some businesses that got caught up in the perfect storm of increased material prices, labour shortages and rising interest rates while locked into fixed-price contracts.”

A series of high profile collapses in the building industry has left the dream of home ownership in tatters for those who had signed-on to contracts. Picture: NCA NewsWire / Martin Ollman

The broader economy has seen insolvencies rise 31 per cent from 2022, while the construction industry has made up the lion’s share of business failures.

Of the 8,471 business collapses year, almost 28 per cent were in the building and construction industry.

And amid a chronic shortage of housing fuelled by Australia’s record overseas migration intake, the collapse of builders, contractors and subcontractors will not only have an immediate impact but could crimp future supply of new homes.

Business collapses pile high

A string of high profile business collapses has rocked the building industry since November 2021.

BA Murphy, Condev Construction, Oracle, LDC, ProBuild, Pivotal Homes, Hallbury Homes, and Warren Homes are among the casualties.

Porter Davis, one of Australia’s largest home builders, collapsed in March this year with 1,700 properties across Victoria and Queensland in progress. A further 779 future homeowners had signed contracts where construction was yet to commence. The firm’s 470 staff were left without work, while 1000 unsecured creditors were left combined debts of $71 million.

Most recently, Queensland-based W3D Construction went into liquidation, owing creditors almost $1.3 million and sporting pavilion project at Brisbane’s prestigious The Southport School, still under construction.

In a separate case, a string of businesses in the cabinetry and building products industry under the umbrella of GDK Group collapsed into liquidation with cumulative debts in excess of $45 million.

Dome Building Projects, which completed bespoke building and renovation works in Melbourne’s eastern suburbs, went into liquidation in October after failing to meet payments to the company’s former director.

Insolvencies in the construction industry have hit an annual record. Picture: NCA NewsWire / Sharon Smith

New businesses not deterred

However, despite the record number of construction firm collapses, as many businesses were established in the sector.

A total of 73,405 construction businesses ceased their operations in the 12 months to June 2023, yet 73,013 new firms also joined the sector over that period, figures released by the Bureau of Statistics showed.