More build firms failing
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
Frequently Asked Questions about this Article…
The building industry in Australia is experiencing a high rate of corporate collapses due to tight margins and sluggish demand. These factors are pushing many operators to the wall, leading to a significant number of insolvencies.
According to the latest insolvency figures from the Australian Securities and Investments Commission, construction firms accounted for more than one in six of all companies that went into external administration in July and August.
The most common reasons for the failure of construction companies include poor strategic management, inadequate cash flow or high cash use, poor economic conditions, and trading losses.
Phoenixing is the fraudulent act of transferring the assets of an indebted company into a new entity to avoid paying creditors. This activity is on the rise in the construction sector.
The corporate regulator has promised to crack down on phoenixing in the construction sector to address this fraudulent activity.
Yes, allegations of civil or criminal misconduct are on the rise, with 3,879 incidents reported to ASIC this year, marking a 3% increase from the previous year.
Poor economic conditions contribute to the failure of construction firms by exacerbating issues like inadequate cash flow and trading losses, making it difficult for these companies to sustain operations.
The issue is quite significant, as construction firms alone account for a large portion of corporate collapses. As Robbie Berry from BCR Partners noted, even adding the next ten industries together wouldn't reach the same level of insolvency.
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