The dramatic collapse of construction giant Probuild, which this week was plunged into administration, came as a surprise to many.
But experts have long been predicting 2022 would be a difficult year for the construction industry, overstretched by inflated supply costs and labour shortages.
Tradies walked off Probuild sites in droves on Wednesday after being told by the company work would cease at the end of the day.
Some claimed to be hundreds of thousands of dollars out of pocket and estimated the company’s total debt to be in the millions.
Probuild officially announced on Thursday morning that Deloitte would take over as administrator after parent company WBHO South Africa said it would cease propping up the Australian arm.
“We are caught up in a set of circumstances not of our making,” a Probuild spokesperson said.
Those circumstances include rolling Covid shutdowns, supply problems and labour shortages that have affected the entire industry and led some experts to predict more company collapses to come.
Bradd Morelli, national managing partner at insolvency company Jirsch Sutherland, told last month that the number of business loan deferrals had surged from 600 to 3500 within the month of August alone.
He referred to the companies as “zombies”.
Mr Morelli told NCA Newswire while Probuild couldn’t have been identified as going under, the high cost, low profit margin construction industry was certainly at risk.
“The building and construction industry has historically been one of the highest insolvency appointments,” he said.
“Margins are tight … particularly in the current environment.”
Mr Morelli said fixed contracts were another factor causing issues.
While they had served the industry well in the past, limited access to suppliexjmtzyws and labour increased the likelihood of delays and budget blowouts, he said.
“The environment has changed and the goalposts have moved to an extent,” he said.
A Probuild spokesperson said the company aimed to protect clients, subcontractors and employees.
“The Probuild brand is strong and we intend to keep it that way,” they said.
“We have several options for raising the necessary capital to continue as a premium Australian building company. These will all be pursued.”
However, Mr Morelli said there would be many people left out of pocket.
“There will be fallout because of Probuild. The amount of stakeholders that it’s going to affect is not small,” he said.
Chief executive of procurement platform Felix, Mike Davis, agreed the construction landscape had shifted in recent years, creating deeper, more complex risks to projects.
“Construction is at a critical juncture, with the number and complexity of large projects colliding with rising costs, supply chain constraints and increasing competition,” Mr Davis said.
He said the issues were well known but also complex and were not being sufficiently addressed by industry or government.
“This is a wake-up call for the industry to play their part in this increasingly complex supply network environment,” Mr Davis said.
“The recent collapse of construction firm Probuild is unfortunately just one of the many detrimental outcomes we can expect to see in Australia, unless more is done to effectively manage risks.”
