We are heading into another wave of builder failures, and this time the risk is sitting squarely in fixed price contracts.

Many builders are still delivering work priced two or three years ago, before construction costs lifted more than 30 per cent.  Costs are now moving again — fuel, freight and materials — but contract prices remain fixed.

That gap is being absorbed by the builder. In many cases, there is no margin left to absorb it.

We are seeing this play out in the data.  Construction continues to account for around 25–30 per cent of all company insolvencies in Australia, with more than 3,200 construction businesses failing last year. With cost pressures returning and demand still uneven across key states, there is a clear risk that insolvency levels remain elevated or increase again.

In our industry, members are effectively funding part of the construction process through credit. When a builder fails, it happens fast and almost always with no prospect of any meaningful recovery.

Unfortunately, things are about to get serious. It is time to perform a serious review of how you manage trade debt. Not just terms and conditions, but how those terms are applied — credit limits, monitoring of payment behaviour, early warning signs and the speed at which issues are escalated.

This is an area where NTHA is working hard to support members.

We have partnered with National Credit Insurance (NCI) to offer a structured review of members’ credit and collections processes, at no cost.

This is a practical, hands-on audit. It looks at how your business is currently managing trade debtors, where the risks sit, and what can be tightened.  It is designed to give you a clear view of your exposure and the tools to reduce it.

In a market like this, small changes in discipline can make a material difference to outcomes.  We would strongly encourage any member with exposure to builder trade debtors to take advantage of this.

Alongside this, we continue to press the broader issue through our advocacy work — highlighting the impact of fixed price contracting, input cost volatility and regulatory burden on the stability of the construction sector. These are structural issues, and they will continue to drive risk until they are addressed.

In the meantime, the focus is clear.

Understand your exposure. Strengthen your processes. Use the support available.

To access your fee-free review of your credit and collections processes, contact the NTHA team on: 1800 822 621