Construction industry ‘resilient’ despite insolvency fears: Master Builders

In the face of warnings about a looming insolvency crisis in the construction industry, the sector has reported a boom in new businesses.

While a record number of construction firms traded as insolvent in the 2022-23 financial year, as many businesses were established in the sector than exited, new data has shown.

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 on Monday showed, suggesting continued confidence in the sector.

Over the same period, 2,213 construction businesses were insolvent, according to the Australian Securities and Investments Commission.

Master Builders Australia (MBA) chief executive Denita Wawn welcomed the figures, saying that despite the turnover, it was promising to see new businesses in the industry continue to be established.

In the 2022-23 financial year, the construction industry has almost as many businesses enter as those that exited. Picture: NCA NewsWire / Brenton Edwards

“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,” Ms Wawn said.

“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.”

The MBA boss said she expected the worst of the impacts from the coronavirus pandemic were now behind the industry.

“We now look ahead to ensure we can remain an attractive and successful sector of the economy,” Ms Wawn added.

“The industry will need to do a lot of heavy lifting over the next few years to ensure we meet our housing targets, put downward pressure on the rental market and lift economic growth.”

The data, which reveals trends across industry more broadly, showed that business entries and exit rates differed substantially from state to state.

Victoria was the only state to record an overall decrease in the number of businesses, with business exits outstripping business entries for the first time since the data series commenced in 2019. A net loss of 7,606 businesses was recorded across the state.

But the new data wasn’t all bad news – Queensland saw an overall increase of more than 11,000 businesses in the year to June.