A domino effect from corporate failures is leaving subcontractors “in crisis”, according to an industry body, with suggestions that collapsed engineering giant RCR Tomlinson had delayed payments for up to 12 months.
According to Louise Stewart of the Australian Subcontractors Association (ASA), thousands of subcontracting businesses will be adversely impacted by the recent collapse of engineering firm RCR Tomlinson — in just the latest example of the flow-on effects to SMEs from corporate failures.
“When it comes to the collapse of companies that rely on subcontractors to undertake the work, the domino effect can be devastating. Unfortunately, the subbies are often left to fend for themselves,” Ms Stewart said.
“When companies fail to pay subcontractors for work done, the subbies still have to pay employee entitlements and taxes.”
Ms Stewart said that a 2015 Senate inquiry found that insolvencies among the building and construction sector alone saddled other related businesses with an estimated $3 billion in unpaid debts, including subcontractor payments, and that more than 1,600 construction companies have already collapsed in 2018 alone.
“Sadly, non-payment issues have long plagued the industry, as evidenced by the subcontractor to RCR Tomlinson that has lost $9 million due to the company not paying for work done,” Ms Stewart said.
“We have been advised by subbies that RCR has been delaying payments as far back as 12 months in order to prop up its own cash flow. And it’s unlikely any of these subcontractors will see their money.”
RCR Tomlinson announced on 22 November that it had entered voluntary administration, with the intention of commencing an immediate sale process.
McGrathNicol is the appointed administrator. The first meeting of creditors will be held simultaneously in four locations (Sydney, Brisbane, Melbourne and Perth) on 3 December 2018.
According to its website, RCR was founded back in 1898, originally as Tomlinson Bros, named after its sibling founders Ernest and Edward Tomlinson.
At the time of its collapse, the ASX-listed group employed more than 3,400 people in Australia as well as in New Zealand and other areas within Southeast Asia.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.