Construction company insolvencies have skyrocketed by a staggering 74% over the past year
The construction sector in Victoria is facing a severe crisis, as company insolvencies have surged by a staggering 74% in the past year.
According to the latest data from the Australian Securities and Investments Commission, 619 building companies in Victoria collapsed over the past year, contributing to the nationwide spike in construction industry insolvencies.
Speaking to The Australian, Builders Collective of Australia president Phil Dwyer, expressed deep concern about the situation.
“It’s never been this bad,” Dwyer told The Australian. “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% and none of these contracts can withstand that sort of increase.”
Master Builders Victoria chief executive Michaela Lihou also anticipated more company failures in the coming months but maintained that the industry as a whole remained resilient, The Australian reported.
“While we’re alert to the recent spike, we’re not alarmed,” she told the publication. “It’s less than 1% of the businesses in the Victorian building and construction industry that have gone insolvent.”
According to ASIC's insolvency statistics, the number of Victorian construction companies entering external administration rose by 73.9% in the 12 months leading up to June 30, compared to the previous year. New South Wales had even worse figures, with a staggering 91% increase in construction insolvencies, totaling 981 companies.
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Despite the challenging circumstances, Lihou expressed optimism about the industry's prospects, noting that many of the pressures, such as supply shortages and price increases, were gradually easing, providing builders with more certainty when costing projects.
The construction sector led the nation in insolvencies across all industries, with a total of 2,211 companies entering external administration, representing a 72% increase, according to The Australian. Melbourne-based home builder Porter Davis was among the high-profile collapses, while Victorian home builder Mahercorp called in administrators earlier this year but avoided failure when creditors backed a rescue strategy.
Looking beyond construction, Victoria also witnessed high-profile company collapses in other sectors, such as the fine-dining restaurant meal delivery platform Providoor, which went into liquidation in May, according to The Australian.
For the entire financial year, Victoria experienced a total of 2,142 insolvencies, up 64%, with construction and the food and hospitality sectors leading the trend. NSW topped the list with 3,283 company failures, a 72% increase from the previous year.
Nationally, the number of Australian companies entering a form of external administration reached 7,943 in 2022-23, up from 4,912 in the previous year, marking the highest number of business failures since 2018-19, The Australian reported.
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