CreditorWatch has published a new report on managing credit risk in the Australian construction industry, titled ‘Cracks in the Foundations 2023’.
The report provides an analysis of the current state of the construction industry, with guidance for firms to help them navigate challenging market conditions and kickstart growth.
Patrick Coghlan, CEO at CreditorWatch, said despite the issues facing the construction industry, there were still numerous opportunities for firms to kickstart growth for the coming years.
Coghlan said: “Construction companies have hit the headlines for all the wrong reasons over the past year, with a slew of business failures across the sector.
“While conditions are expected to remain challenging in the immediate term due to supply chain disruptions, higher interest rates, labour shortages and cost blowouts; there are a range of steps construction businesses can take to put themselves in the best possible position, and continue to grow revenue and profits.”
The report reveals that insolvencies in the construction sector continue to rise – a likely outcome given they are yet to reach pre-COVID levels.
According to CreditorWatch’s March Business Risk Index, the rate of insolvencies in construction accounted for 0.7 per cent of all businesses in the sector, second only to insolvencies in the food and beverage sector during the same period.
James O’Donnell, Founder of data analytics firm Open Analytics, said government assistance during the height of the pandemic meant that the demise of some construction businesses was delayed.
He said: “The very low levels of insolvencies in the construction sector during the COVID-19 lockdowns suggest some businesses that continued trading through this period would not have survived during this time without government pandemic incentives.
“These businesses are now appearing in insolvency numbers due to more expensive inputs, higher interest rates and rising labour costs, as well as the absence of ongoing government handouts”.