Companies collapse as NSW construction faces crisis

Tradies are in for a torrid time as terrible new figures highlight a devastating reality.

Tradies are in for a torrid time as the rate of businesses shutting up shop in New South Wales has jumped nearly 40 per cent in the past year.

Between July 2022 and mid January 2023, around 1600 NSW businesses engaged an external controller. This figure jumped to more than 2200 for the same period since July 2023 according to data from the Australian Securities and Investments Commission.

The hardest hit industry was construction with 80 per cent more companies under administration in the sector than the next most affected — food and accommodation services.

The most common cause of failure nominated by construction businesses was inadequate cash flow, high cash use and trading losses.

Tradies are in for a tough time. Picture: David Caird

CreditorWatch CEO Patrick Coghlan told the Daily Telegraph the increase in insolvencies had three main contributing factors.

He said high inflation and interest rates had deteriorated trading conditions, while interruptions in the availability of labour and materials had all driven up the cost of running a business.

Mr Coghlan said some businesses were kept afloat during the pandemic by temporary protections and were now entering insolvency.

CreditorWatch CEO Patrick Coghlan Picture: Supplied

Some tradespeople had decided to work for themselves and start their own firm during the pandemic, he said.

After trading conditions worsened they struggled to keep the businesses afloat, Mr Coghlan told the Daily Telegraph.

“They don’t know how to manage a company the best way, particularly in a downturn,” Mr Coghlan said.

“They end up closing the company down and going back to the safety of full-time employment.”

ASIC data also revealed 1,541 reports of unpaid wages by construction companies entering administration, almost 1,000 more breaches than any other industry on the list.

In 2022, CreditorWatch issued a chilling warning that the massive increase in business insolvencies was going to continue.

Figures from that year showed a whopping 46 per cent year-on-year increase on companies going into administration.

Mr Coghlan told news.com.au the “massive” rise was a “disturbing trend”.

“With business and consumer confidence declining and inflation and interest rates on the rise, this doesn’t bode well for businesses, particularly small and medium enterprises whose cash reserves were depleted during the pandemic and are now operating on much tighter margins,” he told news.com.au in 2022.