Difficult times in building industry – Daily Telegraph 10-9-08

Excerpts from Daily Telegraph article 10-9-08 and comments

Almost 250 building firms have collapsed in Australia in the past 18 months according to credit agency Dun & Bradstreet.

The company is warning that up to 10% of residential building firms are at “high risk of financial stress or collapse” this financial year. that equates to about 700 nationally and 260 in NSW alone.

Companies have been having a tough time with high interest rates, and that has hit builders cashflow.

New home construction is currently at its lowest level since 1959 due to high interest rates, buyer demand and high costs.

With less work around, competition and prices are very tight and the cost of materials such as steel is rising – not to mention fuel costs.

The news will be a worry for anyone planning on employing a builder as this news comes in the wake of the liquidation of Beechwood homes – the largest contract builder in NSW.

If you are looking to engage a builder, you can undertake a search through Dun & Bradstreet or Veda Advantage and such reports can highlight the danger signs months before a company hits trouble. The search will show if the company has missed payments or had legal action commenced against it.

Research of†Veda Advantage†shows that if a company has a director of a previously failed company on its board, it is twice as likely to go into administration or liquidation as any other company.

Veda says that NSW builders are struggling and this is evidenced by the average payment time for Australia’s residential builders was almost double the standard payment term at 59.7 days. This highlights potential cashflow problems.

As Liquidators, we have seen the liquidation of numerous builders and related trades this year.

In our opinion, it is always prudent to undertake searches of building companies you are considering engaging. You can search with

1. credit agencies such as Veda Advantage to determine what the payment history of the company is,
2. a license search with the Department of Fair Trading and also to see if there are any complaints or disputes with a particular builder,
3. an ASIC company extract to determine the length of time the company has been incorporated and to determine if there are any winding up proceedings against the company and
4. an ASIC search in relation to the directorships of the individuals behind the company to determine their history as directors and whether they have been associated with other failed companies.

Liquidation Direct are insolvency specialist that operate a 24 hour insolvency advice line where you can receive advice in relation to Liquidation, Voluntary Administration, bankruptcy and the alternatives to bankruptcy. Any insolvency issue can be dealt with by calling 1300 767 525 – for free and confidential insolvency advice.