Australian business collapses are running 75% above pre-pandemic levels, with construction the hardest-hit sector, a trend insurance brokers say is reshaping appetite for trade credit and surety cover nationwide.
Analysis from the Australian Industry Group (Ai Group) shows insolvencies have stabilised well above historical norms, driven by a slow economy and rising costs. There were 3,450 insolvencies in the June quarter and 14,150 in the previous financial year, compared with around 2,000 a quarter in the years before the pandemic. Ai Group chief executive Innes Willox said the pattern points to a structural shift in business conditions and confidence, rather than a temporary dip.
Construction accounted for the largest share of failures, with insolvencies in the sector climbing from 1,515 in the 2018-19 financial year to 3,475 in 2025-26, according to Ai Group's analysis. Willox called it a particularly bad sign for the country's ambition to build more homes, adding that the care sector had also seen failures rise sixfold since the pandemic despite historically low exposure to insolvency risk.
The strain is playing out in disputes between subcontractors and head contractors. Sydney carpenters Assia Betyo and Ninab Adam said they are owed $54,000 on a Warriewood townhouse project and are pursuing head contractor KCorp through the courts — the second such dispute the pair has faced in four years. Betyo said trust in the industry was eroding: "It's kind of becoming harder and harder to trust people when it comes to this type of job." KCorp disputed the claim, saying it held a liquidator's report showing the business was not insolvent, but NewsWire noted it did not respond to further requests to verify the claim.
Separate data from the credit reporting agency Equifax, cited by the Australian Institute of Credit Management, show that small construction enterprises with fewer than 20 full-time staff are more exposed than larger firms, with weaker financial indicators recorded across the year to June 2025. That imbalance has direct implications for underwriters pricing trade credit, surety and professional indemnity risk on smaller subcontractors.
Trade credit insurers are responding with buyer-level assessments rather than broad sector exclusions, according to a July 2026 market update from insurance advisory firm Bellrock. Construction accounts for 27% of insolvencies and hospitality 15%, the update noted, with risk now highly specific to individual buyers and transactions rather than industries as a whole. Despite the pressure, Bellrock described the trade credit market as remaining soft, with insurer capacity available even as underwriting remains disciplined.
Fresh cash-flow pressure is mounting on builders as insurers reassess risk. The formal start of the ATO's Payday Super legislation on July 1, 2026, requires employers to align superannuation contributions with regular pay cycles, removing a short-term cash-flow buffer many strained businesses had relied on, according to research from finance advisory firm Scale Suite. The same research found that when a builder collapses mid-project, cover such as Home Building Compensation in NSW may not fully offset costs, leaving clients exposed to gaps in coverage limits and exclusions.
Willox said the data reflected pressure across large parts of the economy and reinforced calls to ease cost pressures on business.
