Jirsch Sutherland
Bathla Group collapse sparks subcontractor insolvency fears, warns Jirsch Sutherland
Lessons from UK giant Carillion show subcontractor liquidations begin within weeks
The collapse of Sydney developer Bathla Group could trigger a wave of secondary insolvencies across Australia's construction sector, warns national insolvency and business recovery firm Jirsch Sutherland. The firm urges subcontractors and suppliers to act immediately rather than wait for unpaid debts to threaten their own businesses.
Jirsch Sutherland Partner Chris Baskerville says the 2018 collapse of UK construction giant Carillion shows how fast supply-chain damage spreads. Within 24 hours of Carillion's failure, subcontractors began laying off staff and disclosing multi-million-pound exposures. The first subcontractor liquidation hit within two weeks, sparking a wave of distress over the following six to 12 weeks, with consequential failures continuing for at least 18 months.
"Carillion showed just how quickly the dominoes start falling - and that full impact doesn't happen overnight," Baskerville says. "The initial shock hit within 24 hours, but the real wave of subcontractor liquidations took weeks and months to roll through the supply chain. We expect Bathla to trigger a similar staggered chain reaction. If you're a subcontractor or supplier with exposure, you need to protect your business now - not wait until the cashflow pressure hits."
Subbies as cashflow buffers The structure of the construction industry leaves subcontractors particularly vulnerable when a major builder or developer fails, says Baskerville.
"Subcontractors often finance projects before receiving payment, covering labour, materials, and equipment costs while awaiting progress payments. Essentially, they act as a cashflow buffer for larger entities," he says. "When a builder or developer fails, payments can stop overnight, but the subbie's own bills don't. Wages, suppliers, equipment finance, tax and super still have to be paid. That's how one company's cashflow problem quickly becomes someone else's."
He adds that the danger isn't limited to the initial unpaid debt. One or two problem projects can easily eat through a business's working capital, leaving it scrambling to cover commitments elsewhere.
"We regularly see that 'rob Peter to pay Paul' scenario, where losses on one or two jobs start consuming the cash generated elsewhere in the business," he says. "Then another payment is late, another project stalls, or the pipeline dries up - and suddenly there's very little room left to move."
Jirsch Sutherland is already seeing this domino effect play out from other construction failures, with Baskerville currently handling an insolvency matter involving a property marketing business affected by the collapse of another building firm.
"We're seeing it happen in real time," he says. "And it shows the fallout isn't confined to the subbies directly owed money. It can spread to other builders, project marketers, suppliers, consultants, and any business whose revenue depends on those projects proceeding." Construction already under pressure The warning comes as Australia's construction sector continues to record elevated levels of insolvency. More than 3,400 construction companies entered external administration during 2025-26, accounting for around a quarter of corporate insolvencies nationally. In NSW alone, more than 1,500 construction businesses entered external administration during the financial year.
Financial distress in the sector is also increasingly reaching business owners personally. AFSA's latest June-quarter figures show 30.4 per cent of personal insolvencies involved people with business interests. AFSA has also identified growing vulnerability among people working in construction and labour-intensive industries, while its latest industry analysis shows construction accounted for 22.9 per cent of business-related personal insolvencies - the highest of any industry.
Baskerville says subcontractors and suppliers should also watch closely for signs of financial stress among other builders and developers they work with.
"Don't ignore changes in payment behaviour," he says. "If 30 days becomes 45, then 60, ask why. Watch for projects slowing or stalling, deadlines slipping, subbies pulling off sites, or being asked to carry more credit. Those can be warning signs that somebody else's cashflow problem is starting to become yours.
"Carillion provides a stark lesson: before its collapse, its standard payment terms had been pushed out to 120 days. A steady stretching of payment terms should never be dismissed as simply the new normal."
Practical steps for exposed businesses
Baskerville recommends subcontractors, suppliers, and other exposed businesses take immediate action:
- Calculate your risk: determine unpaid invoices, progress claims, retentions, work in progress, and future contracted work.
- Plan for minimal recovery: stress-test your cashflow assuming outstanding debts may not be repaid.
- Look beyond immediate debt: model the impact of project stalls, loss of future work, or delayed customer payments.
- Protect your cash: review expenditure, credit terms, and financial commitments before liquidity becomes critical.
- Manage tax and superannuation: prevent one cashflow problem from creating another.
- Seek expert advice early: identifying financial pressure sooner provides more options.
"Hoping the money eventually turns up isn't a strategy," Baskerville says. "Carillion showed how quickly the first domino can fall. If you're exposed to Bathla, the first few weeks matter. Work out what the worst-case scenario means for your business and act now. Don't wait for the pressure to land on your own balance sheet."
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