Over 19% of All External Administrations Are From the Construction Industry
The news is not all bad however as August appointments level out and insolvencies continue their year on year decline.
FTI Consulting’s analysis of the latest ASIC insolvency statistics for the month of August 2017 shows that even though the number of companies entering external administration increased slightly compared with July, the number of appointments has broadly plateaued during August.
In August, 741 companies entered external administration, a marginal increase from 719 in July 2017. August levels are down year-on-year with 812 appointments recorded in August 2016. In addition, the total number of insolvencies recorded in August 2017 is the lowest August total since 2009.
Insolvencies nationally continue to track along a downward trajectory. A total of 7,908 companies entered administration for the 12 months to August 2017, a 17% reduction compared with the prior period (12 months to August 2016) where the equivalent number of insolvencies was 9,562.
However, when looking into the prominence of industry groups in the statistics, we identified the construction industry has seen a general increase in appointments throughout 2017, and has accounted for over 19% of total appointments in the 12 months to August 2017. In fact, the August 2017 figure reflects the second highest level of construction industry related external administrations since March 2016.
James Rogers, Managing Director and Real Estate advisor in the Corporate Finance and Restructuring segment at FTI Consulting, said:
“The construction industry continues to face challenges and has been one of the hardest hit industries over the last 12 months. Over this period, there have been a number of widely reported building company collapses, together with much scrutiny and market commentary surrounding construction industry performance and exposure, in particular with respect to the residential apartment development market.”
He also noted that market pressures such as regulatory changes, continued tightening of financing requirements, concerns over affordability and the demand for residential property have the potential to further aggravate the situation, in particular in markets experiencing historically high supply levels.
“We anticipate continued scrutiny and further challenges for the industry for some time to come,” Mr Rogers added.