More building companies to ‘topple over’, as display home giant Metricon sheds staff to survive
- on Aug 03, 2022
One of the nation’s most prominent builders is set to shed almost a tenth of its workforce, as concerns mount about Australia’s construction industry.
Metricon was forced to defend itself against insolvency rumours just a few months ago.
The company has now told its roughly 2,500-person workforce that it is restructuring.
The move will impact 9 per cent of its workforce.
That works out to more than 200 jobs.
Most of the roles that will go are not in building or construction itself, but in front-of-house jobs like sales and marketing.
In a statement, Metricon’s acting chief executive Peter Langfelder said the company was contracted to build 6,000 homes.
“We are working to restructure our front end of the business given the current climate and the need to move forward more efficiently,” he said.
Australia’s commercial and residential construction industry is currently grappling with a post-boom hangover.
Incentives such as HomeBuilder during the pandemic saw at least 130,000 new homes or renovations subsidised by the federal government stimulus program.
At the same time, the industry has been grappling with soaring inflation or price hikes on a range of crucial materials, including timber, flooring and even toilets.
That’s collided head-on with staff shortages to build new homes, which wasn’t helped by the east coast floods which soaked up many construction and trades workers for rebuilds and repairs.
This year, a long list of building companies, including Previum, Condev and ProBuild, have collapsed.
BIS Oxford Economics senior economist Maree Kilroy told ABC News that Metricon’s restructure was expected in the current climate.
“I’m not surprised,” Ms Kilroy said.
“Home builders are having their margins squeezed.
“And we expect the build costs to remain elevated for another 12 months.
“Already the construction sector as a segment of the total economy for administrations has increased a lot over the last two years.”
Fresh ABS data came out on Monday on approvals for new home builds and loans towards them.
Ms Kilroy’s analysis found that house approvals are now flat and back to pre-pandemic levels.
While there are still homes to be built that were sought during the HomeBuilder boom, once that work is completed, there may not be enough fresh work on the horizon for many companies.
The issue collides head-on with rising interest rates, which impact consumer sentiment and the ability of Australians to take out loans to build new homes or renovate their properties.
On Monday the Reserve Bank of Australia hiked the cash rate again by 0.5 per cent to 1.85 per cent.
“Pinched household budgets, deteriorating credit availability, rising build costs and lengthy delays are set to further drag on new home demand over the next 12 months,” Ms Kilroy said.
“This is on top of a higher assumed dropout rate for projects, with a significantly greater share of approved dwelling not making their way to completion.
“The squeeze on margins felt by home builders will likely lead to more builders toppling over, especially less capitalised small to medium sized operators.”
Metricon’s Peter Langfelder pointed toward skills shortages and supply constraints as reasons behind the job losses.
“With the current headwinds buffeting the industry, specifically labour costs due to competition for skills, combined with present global materials cost hikes and with our very strong existing pipeline of work, we need to carefully balance the pipeline of new builds with the construction side of the business,” he said.
“Our future construction pipeline shows no sign of slowing with more than 6,000 site starts scheduled for 2023.”
In May, when the rumours about Metricon’s insolvency were in the media, the company met with the Victorian government.
Some of the rumours were sparked by the death of Metricon chief executive and founder Mario Biasin.
The company soon after landed a new financing deal, including getting $30 million off its shareholders.