Yahoo Finance Builder warns of industry collapse after 50,000 tradies quit: ‘Very bleak’
Scott Challen has been in the building industry for 15 years and said its 'hanging on by its fingernails'.
A veteran builder fears the Australian building and construction industry is on the brink of collapse as it tries to weather a “perfect storm” of issues.
There has been no shortage of building and construction companies that have collapsed in recent months due to tens of millions of dollars of debt, which has left customers massively out of pocket and devastated.
Scott Challen is the CEO of building and home-improvement company The QHI Group, and he has told Yahoo Finance there are several reasons why the “future is really bleak” for the industry that’s “hanging on by its fingernails”.
Have you been affected by a building company’s collapse? Email stew.perrie@yahooinc.com
Shortage of tradespeople
The building and construction industry is one of the largest sectors in Australia. The total value of work done in the year to June 2023 was just shy of $270 billion, according to Master Builders Australia. That’s more than 10 per cent of the country’s GDP.
But the industry is facing a massive problem when it comes to keeping tradies in the system.
“We've had a mass exodus of people in the industry,” Challen told Yahoo Finance. “Those [Baby] Boomer builders that were in the business, they’ve all pulled the pin and left. So those guys are out, they’ve all retired.
“The older Gen Xs that were builders, they went, ‘You know what, this is really difficult to make a living right now because supply chains are stretched and there's no labour available’.”
There’s also been a huge shortage of apprentices rising through the ranks and replacing the older tradies who have been bowing out. There needs to be an extra 90,000 tradies in the next three months to be able to keep on track the government’s pledge to build 1.2 million homes in half a decade.
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But not enough young people are sticking with their apprenticeship program, with figures showing tens of thousands of apprentices and trainees dropping out since Labor took office.
“There's only 238,000 apprentices in the whole country and we lost 50,000 in 12 months,” Challen told Yahoo Finance. “That's a national disaster.
“We're only seeing the tip of the iceberg right now. This is the Titanic and we are on a collision course … the future is bleak, really bleak.”
Red tape killing the industry
Challen also highlighted the incredible amount of hoops building companies have to go through to get work approved by local councils.
Research released last year found 1.3 million homes could have been built in Australia in the past 20 years if it wasn’t for expensive and extensive zoning, planning and building red tape from councils across the country.
Challen told Yahoo Finance it had slowed the industry down so much that it was almost impossible to do business.
“This is the biggest, biggest, biggest anchor that's hanging off the building industry at the moment,” he said. “We literally cannot get anything approved.
“I've had a building company for 15 years and we've never had so much work stuck in building approval before ever. And what's happened is we've created so much regulation and legislation around getting anything approved through our local councils that the industry is pretty much gridlocked.
“So, it wouldn't matter if we wanted to build it, we can't build it. I've got jobs on the books here that have been stuck in building approvals for 12 months. You can imagine what the price was 12 months ago compared to now, riding the wave of shortage with that as well.
“It's a perfect storm. A lot of these companies might just haven't had the cash flow to be able to move forward because they can't build anything anyway.”
He explained that a lot of the construction company collapses in the past few months had been the result of them relying on deposits from the next job to pay for their current job.
“[Companies] would forward-sell more work to finish the work that they were doing,” he said.
“Their sales teams had gone crazy during COVID, they just sold, sold, sold, sold, sold, but then they couldn't make the contracts that they'd sold with the suppliers and then there was no tradies as well.
“So, suddenly, they had all these deposits on projects that were undersold and, when the tide goes out, you find out who's been swimming naked.”
Migration a key issue
Challen believes the government needs to change its migration and visa laws so more people can be brought in from overseas and moved into apprenticeships.
At the moment, only Australian citizens or permanent residents can start an apprenticeship. Other visa holders can start as well, but only if they meet a specific set of skills first.
“If we can't employ Australians, you need to let us employ migrants,” he told Yahoo Finance. “You've got to let me put on apprentices that come from other countries.
“It's fine for the universities to fill their slots with $50,000-a-year students but the building industry doesn't get any help whatsoever with regards to that.”
Master Builders chief executive Denita Wawn agreed it would be tough to hit that 90,000 tradie target if more people weren’t brought in from overseas. She highlighted three key issues that needed to be addressed for the construction industry to keep up with expectations.
“One is migration, and we know that there are a large number of tradies in this country that can’t get their licences recognised, it’s too expensive and too cumbersome for them,” she told Sunrise. “We’ve got to focus on those who are currently in the country, but their skills aren’t recognised.
“The second area is training more Australians. We really are focusing on particularly school leavers, but also those who want a career change to look at a trade as an opportunity.
“Thirdly, we as an industry need to make sure that we’re not only retaining the current tradies, we’re actually calling back the ones that have maybe decided enough is enough.”
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