More build firms failing

The building industry is suffering from a plague of corporate collapses as tight margins and sluggish demand push a growing number of operators to the wall.

The building industry is suffering from a plague of corporate collapses as tight margins and sluggish demand push a growing number of operators to the wall.

The latest insolvency figures from the Australian Securities and Investments Commission show construction firms accounted for more than one in six of all companies that went into external administration in July and August. Nearly 350 collapsed in that two-month period.

"You can add the next 10 industries and not reach that target. It's exceptional," said Robbie Berry, of BCR Partners.

The most common reasons for a failure include poor strategic management of business, inadequate cash flow or high cash use, poor economic conditions and trading losses, according to new data for the 2012-13 financial year.

Allegations of civil or criminal misconduct are also on the rise after 3879 incidents were reported to ASIC this year, up 3 per cent on 2011-12.

The corporate regulator has promised to crack down on "phoenixing" in the construction sector.

Phoenix activity is the fraudulent act of transferring the assets of an indebted company into a new entity in a bid to avoid paying creditors.

cvedelago@fairfaxmedia.com.au

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