Master Builders Victoria (MBV) analysis of Australian Securities and Investment Commission (ASIC) insolvency figures shows that 19 Victorian building and construction companies entered external administration in September 2021.
Nationally, September 2021 saw 83 building and construction companies across Australia entering external administration, up 31 per cent on the same month last year.
The figures show there were 358 building and construction insolvencies recorded in Victoria for the 12 months to September 2021, 13 less than NSW, which recorded a nationwide high of 371 insolvencies.
There were 1,009 building and construction insolvencies in Australia from the year to September 2021.
Meanwhile, in the three months to September 2021, Victoria saw 56 building and construction companies hit the wall and enter external administration.
As Victoria moves further through the COVID-19 pandemic, MBV CEO Rebecca Casson said building and construction insolvencies were expected to rise following the withdrawal of State and Commonwealth business support coupled with the continued challenge of supply shortages and rising product prices.
“Even though 2020 saw Australia’s first recession in almost 30 years, the volume of insolvencies was remarkably low across the board,” Ms Casson said.
“But this was thanks to the unprecedented arsenal of business supports unleashed during the year as well as aggressive cuts to interest rates.
“The withdrawal of some of these supports earlier this year is partly the reason why insolvencies have increased compared with last year.
“Over the three months to September 2021, building and construction insolvencies nationally were 30.9 per cent higher than the same period in 2020.”
Ms Casson said one of the biggest challenges facing Victorian building and construction companies was escalating building product prices and supply shortages.
With building contract prices locked in, the large and unanticipated surge in the prices of many building items such as timber and steel-based products means that some builders are finding that the cost of completing work is more costly than expected.
In some cases, this may make some projects loss-making.
Ms Casson warned that continued supply shortages added to lockdowns in 2021 are likely to further influence building and construction insolvencies in Victoria over the coming months.
“While the number of building and construction insolvencies has fallen in Victoria over the past year, this outcome may partly reflect the fact that Victoria was in lockdown for many months this year with the accompanying business supports protecting firms from some types of financial stress,” she said.
“With the end of Government stimulus packages approaching as our State begins to ease out of COVID-19 restrictions, along with changes in debt financing capabilities recently introduced by APRA, our industry can expect to feel a slowdown as the sugar rush starts to fade.
“With many of these supports now withdrawn, there will be added pressures placed on many of these building and construction firms to stay afloat.”
MBV continues to advise members to use alternative contract measures hoping that this will relieve the pressures of increased fixed-price contracts and spread awareness and education on supply shortages.
However, these measures are only applicable to new contracts and do not apply retrospectively to contracts already in place.
MBV is also actively involved in finding supply shortage solutions to ensure sustained growth for the building and construction industry.
The report on the sector’s supply chain challenges is expected to be released soon by the Victorian Government’s Red Tape Commissioner and the Commissioner for Better Regulation.
The five-year monthly average for building and construction insolvencies during September in Victoria is 33.8, making it one of the busier months of the year.