The fall of Perth builder Clough into voluntary administration after more than a century in business marks the latest in a string of local builders to hit troubled waters.
Having been responsible for major Perth projects like the Narrows Bridge, Graham Farmer Tunnel and many others across the state and world, their legacy now hangs in the balance.
But with an eighth consecutive interest rate rise, and growing economic pressures, the expectation is that this is just the tip of the iceberg.
Clough had been in financial difficulties, but there was hope that would be alleviated when the company announced an agreement to be bought by Italian construction firm Webuild in early November.
"With their substantial balance sheet, Webuild will provide a strong foundation on which Clough's continued growth is well supported," CEO Peter Bennett said at the time.
But on Monday came the announcement that the deal had fallen through, with both sides agreeing "there is no reasonable prospect of that acquisition proceeding through to a successful completion".
It left the company with little choice but to be placed into voluntary administration, overseen by a team from Deloitte.
"We understand this news will be unsettling, disruptive and stressful for stakeholders, including employees, customers, joint venture partners, contractors and suppliers," said voluntary administrator Jason Tracy in a statement.
"We ask that all stakeholders be patient while we work through options and begin engaging with employees, unions, principals, subcontractors, joint venture partners, regulators and others as soon as practicable.
"Clough Group has a long history both in Western Australia and nationally, and involvement in a diverse range of important projects.
"We will be pursuing all options to find a new owner to take the business forward."
Development not unusual
It was an outcome that WA's Regional Development Minister Alannah MacTiernan said was not unusual.
"It's during the upturns where prices have been given, contracts have been entered into and they just, because of the difficulty of people and materials, they can't deliver at the price they have contracted for," she said yesterday.
After years of government support, and organisations like the Australian Tax Office backing off their enforcement efforts, insolvency practitioners say they're expecting work to pick up over the months ahead.
Murray Thornhill, managing director of HHG Legal Group, said it was leaving two types of businesses at risk of folding.
The first was "marginal" businesses that made it through the last few years as a result of stimulus and support.
The other category was those businesses that are dealing with the after-effects of the pandemic.
"Things like impacts on global supply chains and delays," he said.
"Labour shortages create delays, which then impact prices, so the cost of everything goes up, the time it takes to do anything increases.
"And all those costs end up being passed on and squeeze margins or remove margins all together in projects."
Insolvency practitioner Daniel Bredenkamp, executive director of Pitcher Partners, gave a similar assessment of what could be ahead.
Beware the domino effect
"It's going to be a bit of a domino effect," he said.
"The guys that did work for them, they're waiting for that money to pay their suppliers, to pay their subbies, and then all of a sudden that money just doesn't come in.
"And then you see the dominos starting to impact each another."
Mr Bredenkamp did not expect pressures to start rising until early next year, given the buffers many people and businesses had managed to build up over the last few years.
He said while the current situation would no doubt be stressful for Clough's staff and creditors, voluntary administration was about trying to "get out the other end" with a sustainable company.
"The administrators will now look at what other options [do we have?]" he said.
"Do we have some of the projects we can walk away from?
"Maybe that's one or two projects that have caused them to go into voluntary administration, and then they'll make an assessment of all those projects."
Fears of delays
Among the projects at risk of being affected are:
- Snowy Hydro 2.0 — one of Australia's biggest renewable energy projects
- The second stage of the Waitsia LNG project
- A $4.5 billion Perdaman fertiliser plant in the Pilbara
Ms MacTiernan said the government had already spoken to Perdaman yesterday.
"They believe this is going to set their project back some months but they believe they can find another EPC [engineering, procurement and construction] contractor," she said.
Clough was also working on the Stephenson Avenue Extension in Osborne Park, but Main Roads believes the project will be completed by another company already involved in the scheme.
A spokesperson said subcontractors on the project would continue to be paid, because of "mandatory project bank accounts" which protect payments to suppliers and subcontractors even if head contractors experience difficulties.
