Construction Delays Pushing Builders into Red

More than one in 10 construction businesses are struggling to pay their bills on time as the industry emerges as the worst hit by Covid.

The Creditor Watch report on business arrears showed the construction industry universally remained the worst performer when it came to businesses in arrears, often due to stalled project financing or other delays.

The construction industry, at 12.3 per cent of businesses overdue on payments, was closely followed by the hospitality sector at 11.2 per cent, which was historically a high-risk industry but even more so due to the impact of Covid.

Meanwhile, price pressures, labour shortages, supply issues and lockdowns were also slowing the sector.

Banks were contributing to the problems faced by construction businesses with project equity tied up, with lengthy settlement timelines.

Proportion of businesses 60+ days past due invoices

^{_{^Source: Creditor Watch, July 2021}}
Across the country, the ACT was the worst performing state or territory while Sydney was the worst performing city, experiencing much higher rates of arrears than the other capitals.

Isolated cities such as Darwin and Perth were performing better than others with self-contained economies and mining boosting those areas.

Creditor Watch CEO Patrick Coghlan said a lot of smaller businesses were failing due to challenges with cash flow.

“With the Covid situation worsening across Australia, it’ll be interesting to see if the government income support for New South Wales and Victoria delays insolvencies in these states,” Coghlan said.

“Insolvencies across Australia have remained largely flat over the past year, particularly during the JobKeeper period.

“However, even regional businesses that mostly escaped the worst of the 2020 lockdowns are now facing the damaging financial impacts of the Delta strain.

“In the next 12 months, we expect there to be a roll through of postponed insolvencies now businesses are fending for themselves.”

Currently a quarter of all insolvencies in the country were within the construction industry with tiny profit margins impacting companies big and small.