How the rise in bankruptcies in the construction industry is affecting the financial world and what experts say about it

How the rise in bankruptcies in the construction industry is affecting the financial world and what experts say about it

According to a report from www.ots.at, a total of 667 construction companies in Austria filed for bankruptcy by September 2023, an increase of 16 percent compared to the same period last year. Overall, the construction industry is responsible for almost a fifth of all company bankruptcies in Austria. The main driver for the insolvency dynamic is the weak order situation, which is hitting many project developers and construction companies hard. The effects are clear: a third fewer building permits were issued than in the same period in 2019, while rents rose by an average of 8.6 percent.

In addition to high material costs and strict lending guidelines, the construction industry is also struggling with rising labor costs and a shortage of skilled workers. The situation in Austria is also reflected in other European countries, with the number of insolvencies in the construction industry increasing sharply, particularly in Germany.

Given this development, it is expected that the shortage of affordable housing will continue to worsen. Small and medium-sized companies particularly suffer from liquidity problems and interest burdens. The only bright spot is the renovation boom that has started during the Covid pandemic and is keeping some construction companies afloat as financial incentives to increase the energy efficiency of houses and apartments are taking effect.

Overall, the situation in the construction industry in Austria and Europe is worrying, as market participants are faced with a variety of challenges that have a negative impact on the industry, the consumer and the market.

It is important that the government and stakeholders take action to support the construction industry and mitigate the negative impact on the housing market and the economy as a whole. This could include, for example, providing financial incentives or improving lending conditions.