The construction industry, a space largely made up of sole traders, is facing an insolvency crisis. About 1,400 construction firms filed for bankruptcy in the second half of 2023 alone.
Tradies already have to contend with long hours of labour-intensive work in challenging environments from cramped spaces or exposure to extreme weather conditions, resulting in illness and injury. But the industry has faced significant challenges in recent years, exacerbated by the pandemic, inflation, and a cost-of-living situation that has driven many individuals and businesses over the edge.
Especially vulnerable to challenges are small construction businesses and sole traders, the latter of which constitutes 68 per cent of the construction sector.
Such businesses have to deal with fluctuating workloads, cashflow, and the responsibility of keeping a business afloat and employees, not to mention the nature of their work.
“Those that own their own business or are sole traders have the added stress of keeping admin at bay, cash flowing, and jobs coming in, so it’s just a pipe ready to burst without an outlet,” noted Dan Pollard of Safe Work Australia.
No financial protection for small building businesses
Louise Stewart’s life imploded when her husband, Adam, went bankrupt.
Adam was a subcontractor for government projects, and not paid for work he did due to several builders’ businesses being placed in insolvency administration. As a result, his business was forced into bankruptcy.
“It was incredibly tough. Mentally, it broke him. It affected our marriage and had a significant impact on our children as well,” she shared.
Louise and Adam’s experience is far from unique – many tradies find their personal lives taking the hit when business challenges arise. Equifax found that sole traders in construction are 60 per cent more likely to be in early mortgage arrears versus the average consumer.
Stewart lamented that government support has been lacking in providing the assistance sole traders in the construction industry need it to in order to survive in these times.
She says, “The same problem persists – Australian governments have yet to implement measures to protect subcontractors’ payments from builder collapses. Nothing has changed.”
As such, government action would be needed to ensure the welfare of tradies in the construction industry, particularly when it comes to payments.
“We need to follow the system already in place in the USA and Canada, where it’s illegal for builders to misuse funds meant for subcontractors,” Stewart pointed out. “Funds should be protected from the insolvency administration process.”
In the meantime, Stewart developed the ProjectPay app, which automates payments directly to subcontractors, protecting them from the financial risks of builder insolvencies. After losing everything herself, she founded the tech company to prevent others from facing the same fate.
Physical and mental burdens
Pollard notes that small construction businesses are facing a recipe for mental exhaustion.
“The physical exhaustion and chronic pain associated with physically demanding work also affects mental well-being, and we need to be talking about it,” he says. “Time pressures add another layer of stress, as tradies often find themselves meeting tight deadlines and managing emergency callouts, which makes them feel like they are living in a constant state of urgency.
“Let’s face it, as tradies we aren’t always good at recognising or admitting that we need more emotional support,” he says. “But it’s time to change that.”
With eight construction companies going bust every day, it’s clear that the industry is in a precarious position. Without stronger support and protections in place, small construction businesses and sole traders will continue to bear the brunt of financial strain and mental exhaustion.
