Two more SMEs in the building and construction industry have fallen during in the past week, highlighting how much pressure the sector is under as demand continues to wane and lending finance remains scarce.
The collapse of Tasmanian-based Stratton Engineering and Sydney-based Artarmon Timber & Boards come days after South Australia-based Bianco Structural Steel was forced to close by administrators.
The situation is dire according to experts, with Housing Industry Association chief economist Harley Dale saying there is a confluence of factors creating pressure for building companies.
“We are concerned from the association’s perspective,” Dale says. “New home building conditions are quite weak but I think drilling below that you have a multitude of factors that are driving that weakness.
“You have soft demand on one hand, you have supply side issues related to high taxation and regulatory costs on the other and the additional burden of the lending environment past the global financial crisis, that is now considerably tighter.”
Dale says while demand is low the industry is in need of tax reform which could help some companies.
Stratton Engineering, which operates a number of divisions including steel fabrication, blasting/painting and fence building, had an administrator appointed on Tuesday this week.
The company was founded in the 1980s and did maintenance for Brambles Shipping, but has since expanded. in 1989 branching out into blasting and painting.
Shaw Gidley director Scott Newton says he was appointed to the company after it was sold to a Tasmanian group and is now assisting with the sale of the business after the former owner of Stratton passed away before the sale could be completed.
“The sale actually occurred prior to my appointment. I’m here to assist with the affecting of the sale as it is an exchange that hasn’t settled yet,” Newton says.
He says the company is “insolvent and has been for some time” but whether the company can continue is an issue for the new owners.
Stratton has about 50 employees, but Newton could not confirm revenue.
Timber products manufacturer Artarmon Timber & Boards collapsed with Worrels partner Christopher Darin acting as administrator, appointed on Monday this week.
Worrels was contacted but Darin was not available prior to publication. Artarmon was also contacted for comment.
Dale says the building industry needs assistance and he wants to see more discussion about the sector at this year’s tax summit.
“It’s a heavily taxed sector compared to the rest of the economy,” he says.
“Some kind of reform is needed and would provide confidence to the sector. It would also increase the prospects of boosting activity again sooner rather than later.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
