Over the past few years, Australia’s construction sector has been facing unprecedented pressure, and by mid-2025, the effects have become painfully clear. Dozens of major construction companies across Queensland and nationally have gone under, leaving behind unfinished projects, unpaid contractors, and thousands of affected workers.
At JCL Law Partners, we work closely with businesses facing financial distress, including those in the construction sector. While every collapse has its own circumstances, there are some consistent factors driving the crisis across the industry.
Tight margins and fixed-price contracts
One of the biggest challenges construction companies face is the widespread use of fixed-price contracts. These agreements lock in the cost of a project before it begins. While they offer certainty to clients, they leave builders with little room to absorb rising costs – something that has become all too common in recent years.
When the cost of materials or labour increases mid-project, builders still have to deliver under the original contract terms. For many, this means operating at a loss just to meet obligations. In some cases, one or two underpriced jobs can push a business into insolvency.
Escalating costs and supply chain disruption
Construction costs have soared since the pandemic, driven by global supply chain issues, shipping delays, and material shortages. Although supply chains have begun to stabilise, prices remain high, and companies that signed contracts in earlier years are still feeling the pinch.
Add to that labour shortages, which have driven up wages, and it’s easy to see why project budgets have blown out. Businesses are being squeezed from all directions, often with no way to pass on the increases to clients.
Delayed payments and cash flow pressures
In the construction industry, cash flow is everything. Businesses often front the cost of labour and materials and wait weeks (or months) to be paid. When payments are delayed, the pressure quickly mounts.
Subcontractors, in particular, bear the brunt. They may be waiting on payment from head contractors, who in turn are chasing funds from developers or owners. A delay at the top of the chain can leave dozens of smaller businesses struggling to pay their own workers and suppliers. The result? A domino effect that puts everyone at risk.
Project cancellations and market volatility
Interest rate rises and economic uncertainty have caused some developers to put projects on hold or scrap them altogether. Residential construction, especially in Queensland, has seen a slowdown in new approvals as affordability pressures bite.
For builders relying on a steady pipeline of work, any dip in demand can have a big impact. And once a project falls over or a key client withdraws, companies can find themselves overextended, with no work to fall back on and fixed overheads still ticking over.
Licensing and regulatory pressure
Queensland’s construction sector is heavily regulated, particularly through the Queensland Building and Construction Commission (QBCC). While the QBCC plays a vital role in protecting consumers and ensuring standards, it also enforces strict financial thresholds for licensed builders.
If a construction company can’t demonstrate sufficient working capital, it risks suspension or loss of licence, effectively shutting down operations. For businesses already on the edge, the threat of licence action can push them over the line.
Legal and financial complexity
When construction businesses collapse, the fallout can be messy. There may be multiple creditors, overlapping contracts, joint ventures, subcontractor claims, and employee entitlements to manage. This is not just a financial problem, it’s a legal one.
At JCL Law Partners, we’ve supported construction companies through restructuring, emergency asset sales, and other recovery strategies. We understand the unique challenges of the sector and how to navigate them. More importantly, we know that once financial trouble starts, early intervention is critical.
What can be done?
There’s no quick fix for the pressures the construction industry is facing. But there are steps businesses can take to protect themselves.
- Review contracts carefully. Where possible, include provisions that allow for cost variations or time extensions in the event of supply chain disruption.
- Prioritise cash flow management. Keep close tabs on payment cycles, and have a plan in place for when payments are delayed.
- Monitor financial health. Regularly assess whether you’re meeting licensing requirements and whether your capital structure supports your work in progress.
- Seek advice early. Whether you’re concerned about one project or the overall viability of your business, the sooner you act, the more options you have.
It’s not too late to act
Construction businesses are among the most resilient operators in Queensland, but the past few years have tested that resilience like never before. If your company is facing mounting pressure, whether from a bad contract, a delayed payment, or a declining pipeline, it’s not a sign of failure to seek help.
Restructuring, emergency asset protection, and creditor negotiations aren’t just about crisis management. They’re tools that, used wisely, can stabilise your business and protect your future.
At JCL Law Partners, we work with struggling companies of all sizes to find practical, commercially sound ways forward. If you’re seeing early signs of financial stress, let’s talk before it’s too late.
