Construction Insolvencies Surge at the Start of FY25

Insolvencies in the construction industry continue to rise, accounting for over a quarter of all insolvency appointments in the current financial year. There's no indication that the trend is slowing down.

According to figures released by the Australian Securities and Investments Commission, there have been 415 construction industry insolvencies between the start of July and August 11. This represents nearly 26 percent of the 1,604 total insolvencies recorded so far this financial year.

The data has revealed 328 insolvencies in July, the first full month with available figures. This is a rise from the 295 insolvencies reported in the same month last year and significantly higher than the 199 recorded in July of FY23.

The high proportion of construction companies—comprising about 17 percent of all businesses—not only results in job losses for employees of failing firms but also signals continued disruptions and costly delays on construction sites.

Builders have been disproportionately affected in the post-pandemic landscape, largely due to being locked into fixed-price contracts that limit their ability to pass on rising costs to customers—unlike civil contractors, who have had more flexibility, according to Ai Group research.

Over the five years leading up to FY23, builders faced a 29 percent increase in material costs and a 42 percent rise in wages, while their sales income only grew by a modest 21 percent, the Ai Group data reveals.