ProBuild collapse: Why thousands of Australian tradies are going broke

Skyrocketing prices of commodities have left Aussie tradies struggling to make ends meet, with thousands of businesses at risk of going bust.

Supply chain issues and lack of stock from national and international sources has led to a spike in demand and prices for materials, with tradesmen and women feeling the brunt.

Costs of metal ores, plastics and timber have been consistently rising for years, but particularly through the pandemic as factories were forced to shut down for extended periods.

The trickle-down effect of these surging costs mean Aussie workers are being forced to cover the difference, with the country on the verge of a major crisis.

‘I don’t think a lot of companies are taking the cost increases seriously. It’s a perfect storm,’ Matthew Mackey, executive director of engineering company Arcadis.

‘Smaller businesses don’t have the cash flow, they don’t have the same safety net. They’re going to feel the pain a lot sooner and a lot more harshly.’

Materials, including steel and timber, are seeing the most significant surge in prices due to international demand and a lack of supply. Electrical products, PVC and roofing materials are also impacted.

While large companies manage big orders, small to medium businesses are struggling – with extended waiting periods for materials impacting jobs.

Margins are also significantly decreasing, with the construction industry generally only seeing profits between two and four per cent.

Prices of materials have been rising steadily since the start of the pandemic, but exploded in April and May last year (average prices of commodities – Arcardis statistics)

Mr Mackey said contractors are feeling the pinch after locking themselves into agreements months before rising costs of materials, meaning they have to bare the weight of the difference – seeing razor-thin profits if not total losses.

‘Some people are blaming the pandemic, some are blaming material cost increases, but there’s a bigger issue, and it’ll affect just as much as the bigger companies as the smaller businesses,’ Mr Mackey said.

‘The market is trying to respond to the volatility. It’s less now about supply availability, but energy costs are going through the roof, commodity prices continue to rise, material costs are still increasing.

‘Contractors, particularly trades, are going to be struggling. If they’ve already signed a contract that doesn’t allow for fluctuations in materials, they’re going to be stuck with those prices.

‘If costs have gone up in six months, they’re going to have to wear those costs, and that’s the issue.’

He said the rising costs of structural steel was having wide-ranging impacts on the market and meant inflation was trickling down to Aussie tradies. 

‘If iron ore goes up, that has a direct impact on the cost of steel. That is passed down to the person who’s providing the materials and that is passed to the contractor,’ Mr Mackey said. 

While large companies are managing with big orders, small to medium businesses are really struggling – with extended waiting periods for materials impacting jobs

The Arcadis director also said the impacts of the Suez Canal blockade, where the 400-metre 20,000-container Ever Given was stuck for six days, is still impacting the market.  

‘You wouldn’t believe one ship blocking a river would create such a shortage. That impacts transport costs,’ he told Daily Mail Australia.      

Rising costs are also believed to have fueled the collapse of major construction firm ProBuild, after it was revealed the company owed $14million to workers for its doomed 443 Queen Street project in Brisbane.  

The chief executive of South African parent company Wilson Bayly Holmes-Ovcon that owns Probuild (WBHO) said there had been ‘red flags’ years ago. 

Wolfgang Neff told an interim results presentation last week that in hindsight operations in Australia would have been abandoned a lot earlier. 

‘If we knew everything we know today we would have pulled the plug years ago,’ the chief executive told the Herald Sun. 

The owners of major construction company ProBuild have admitted the troubled firm should have been shut down years ago (pictured, construction workers in Darling Harbour)

‘The reality of it was the exposure in terms of the guarantee facility over the last 18 months restricted this decision. The risk versus reward became untenable.’

Earlier this week, it was revealed ProBuild owed 786 employees across 19 projects $14million, and even more to its 2,300 creditors. 

It comes after WBHO this week told the Johannesburg Stock Exchange it could no longer profitably build apartment complexes. 

As a result administrators were assigned to Probuild after the parent company refused to throw any more money at the failed construction firm. 

The bombshell decision will jeopardise 18 building and civil engineering projects around Australia and the livelihoods of nearly 800 workers. 

The group’s project inBrisbane for a 264 high-quality residential apartments has hemorrhaged as much as $223million in material losses. 

Earlier this week, it was revealed ProBuild owed 786 employees across 19 projects $14million, and even more to its 2300 creditors (pictured, a construction site in Darling Harbour)

Victoria has been the worst-hit state in terms of rising materials prices, with the average cost of building a new home rising faster than anywhere else in the country.

Master Builders Victoria CEO Rebecca Casson underlined Mr Mackey’s fears for tradies, telling Daily Mail Australia they feared it would send several businesses into insolvency.

‘With building contract prices locked in, the large and unanticipated surge in the price of many building items such as timber and steel-based products meant that some builders were finding the cost of completing works more expensive than expected. In many cases, this can make projects loss-making,’ she said.

‘MBV has stated that labour shortages will also impact building and construction insolvencies in Victoria over the coming months.’

Australian Council of Trade Unions Secretary Sally McManus said rising costs were in turn seeing workers’ wages ‘going backwards’, pointing the finger at Prime Minister Scott Morrison for failing to address the growing crisis.

‘The Morrison Government has been nowhere to be seen when it comes to fixing wages growth and this inaction is now a huge weakness for the whole economy,’ she told Daily Mail Australia.

The pandemic isn’t to blame. With the cost of living going up and wages going nowhere, a worker earning $68,000 last year received a pay cut of $832.

‘As one of the largest employers in the country, the Prime Minister could immediately take action on this by sending a signal to other employers and giving his own workers a pay rise, but instead gave them a real wage cut.’