Top Stories


    Jul 27, 2015

    More building firms shut despite demand

    MORE construction companies are winding up amid the continuing manpower crunch, cost pressures and slow industry growth.

    Last year, 51 firms filed petitions for compulsory liquidation, up from 27 in 2013.

    Another 36 firms were wound up, compared to just 13 in 2013.

    But demand in the sector is stronger than ever, with $37.7 billion worth of contracts awarded here last year.

    The figures for both petitions filed and firms wound up were the highest in the last decade, according to data from the Ministry of Law's Insolvency Office.

    The rise is likely due to accumulated pressures rather than any specific recent factor, according to Singapore Contractors Association president Kenneth Loo.

    "Firms might look at the situation now and think: There's a manpower shortage, cost pressures, the industry is not doing that well - maybe it's time to throw in the towel," he said.

    Last year, the sector grew 3 per cent, down from 6.3 per cent in 2013.

    But Mr Loo stressed that it is hard to generalise about the state of the industry, with smaller players tending to be worse hit.

    The overall numbers of petitions filed and firms wound up in Singapore have risen since 2007.

    The proportion of construction firms has been growing.

    The sector accounted for about a fifth of all firms which filed for compulsory liquidation last year.

    This is up from 14 per cent in 2013 and 10 per cent in 2012.

    Similarly, more than a fifth of the firms wound up last year were from construction, up from about 10 per cent before.

    The main pressures faced are the shortage of workers and higher labour costs, said Mr Loo.

    Foreign-worker levies have risen repeatedly in the last few years, although this year's scheduled hike has been deferred till next year.

    These pressures do not just affect subcontractors on the ground, but are also passed upwards.

    "Subcontractors are quoting much higher than before and it can be more than what we budgeted," noted Authentic Builder contract manager Lim Tian Seong. "We cannot predict what the price of finishing works will be in a year's time."

    Mr Loo also noted that many small firms are family based and face succession issues. Some have already closed as the younger generation did not want to take over.

    This year could see a rise not just in firms that wind up, but also insolvent construction firms in general.

    For the last three years, the sector saw between 2,300 and 2,400 newly insolvent firms each year.

    From the beginning of this year to the end of May, there were almost 2,000 insolvent construction firms, according to the Singapore Commercial Credit Bureau.

    However, demand is set to remain robust.

    The Building and Construction Authority has predicted that $29 billion to $36 billion worth of contracts will be awarded this year, with similarly strong construction demand over the next five years.

    But the pressures, too, will continue to build. In July next year, the monthly levy for unskilled work-permit holders in construction will rise to $650 a month, up from $550 now.