Rising Trade Credit claims are causing alarm in the construction sector, as more sub-contractors default on payments. Melbourne is seeing the worst of it, but Sydney is affected as well.
The impact of these defaults flow-on to developers, suppliers and insurers; with substantial losses and implications for project viability.
Everyone’s aware of the main challenges the sector faces:
What hasn’t been highlighted is the major issue of Trade Credit defaults.
The collapse of CDC Plumbing and Drainage earlier this year left Reece Plumbing as its largest creditors. Reece Plumbing is a client of QBE Trade Credit. It’s possible Reece may have suffered nearly $20M of bad debts in the last 3 months alone. Insurers consequently are pricing in the increased risk of Trade Credit, which flows on to clients as higher premiums.
It’s a Domino Effect that reverberates across the sector. However, there are steps that can be taken to offset the risks.
The quality of subbies isn’t just in the work they do. Those with a history of defaults can indicate they’ll likely not perform to expectations (not just onsite).
This why we recommend all construction clients and contractors obtain a base Creditworks Report. It provides basic information, and details any defaults.
If you need more detailed information, we can provide a Trade Report, which gives payment information and background on a business’ Directors.
We can compile the Creditworks Report for you, and advise on other ways to avoid potential risks. I’m here to help in whatever way I can during this challenging period for the sector.