Australian construction woes set to continue as builders brace for further insolvencies | Kanebridge News
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Australian construction woes set to continue as builders brace for further insolvencies

Rising inflation, trade shortages and supply chain issues predicted to place more at risk of defaulting

By Robyn Willis
Wed, Oct 19, 2022 2:23pmGrey Clock 2 min

The risk of Australian construction businesses defaulting has increased for the next 12 months, a credit risk assessor White Paper has revealed.

The September 2022 CreditorWatch Business Risk Index shows that while B2B defaults dipped last month, they are still well above 2021 levels. Recent default levels are a strong indicator of future defaults.

CEO of CreditorWatch Patrick Coghlan said in the company’s White Paper that their analysis had noted in October 2021 that Probuild, one of Australia’s largest construction companies, was at serious risk of defaulting. The company collapsed in late February with $5 billion worth of projects in the pipeline.

Coghlan noted that despite some positive signs, including increases in B2B trade activity and credit enquiries earlier in the year, continued supply chain issues, trade shortages and rising inflation still placed builders at risk.

As a major employer, any downturn in the construction sector has serious implications for the wider economy, he said.

“A healthy construction sector is vital to a strong economic recovery and ongoing growth. The industry employs roughly nine per cent of Australian workers, putting it behind only healthcare, retail and professional services in terms of employment numbers.”

While CreditorWatch noted according to their own March 2022 report that the construction industry has a low probability of default at 3.9 percent, the outlook for the next 12 months is concerning.

James O’Donnell, CEO of Open Analytics says some big players have already fallen, giving all those in the construction sector  – large and small – pause for thought.

“We have seen some big-name failures in recent months and the fallout from these events on smaller players is yet to be fully realised,” he says. “Cost pressures and compressed margins don’t appear to be going away soon, so expect more insolvencies in this sector over the next 12 months.”

  



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