The construction industry is confronting the twin challenges of a tsunami of projects expected to peak next year, yet many hurdles threaten to thwart success.
Rising rate of insolvency in construction
Protracted supply chains, increasing material costs and a chronic skills shortage have helped contribute to a more than 40% jump in Australian construction businesses declaring bankruptcy in the last 12 months.
Homeowners left with unfinished houses are petitioning state governments for more consumer protections when construction firms collapse.
But what about the construction businesses still operating? How can they move to complete their projects profitably?
Why are firms struggling?
Margins continue to shrink due to inflation, and continuing skill and material shortage. There is a potential domino effect for sub-contractors and tradies to feel the pinch or worse.
A recent report has estimated that over the past 30 years, the construction sector has forgone $35B due to poor multi-factor productivity performance. Globally, the construction sector is known for its low adoption of technology, innovation, prefabrication, and off-site manufacturing. Insight has shown that digital technologies can help optimise construction.
Ongoing contract risks
Meanwhile, contractors and subbies are questioning their reliance on fixed contracts. Many construction firms still deal with other parties on a “handshake” basis. An industry survey found eight in 10 people in the industry weren’t always fully aware of or knew the risks they were responsible for managing under their contracts.
How the insurance market is changing
Insurers, however, have their eye on the risks, with some leaving the market in 2021. That has meant less competition as premiums and excess levels have increased. The rise in natural disasters and project failures are also being factored into the way the insurance market operates.
Insurers prefer short-term risk management, moving away from long-term contract periods. So, for construction firms overall, it pays to scrutinise policy fine print to ensure you’re securing the insurance coverage you need.
If you would like to know more about protecting your business in these challenging times, please CLICK HERE or contact us for more information.