The collapse of one of Australia's oldest engineering firms, RCR Tomlinson, which went into administration this week, has left thousands of subcontractors struggling to survive.
The collapse of RCR, which has 3400 employees, has hurt thousands of people around Australia, with staff uncertain as to whether they will still have jobs at Christmas.
RCR Tomlinson has 41 subsidiaries in Australia, three subsidiaries in New Zealand and five in Asia, including businesses in Malaysia, Indonesia, Hong Kong, Vietnam and India.
Employees have been directed by administrators McGrathNicol to continue with their normal duties, while suppliers have been told administrators cannot approve any purchases by RCR until short-term funds are provided by the company's banks.
McGrathNicol is seeking a buyer to take over the business but if one cannot be found, it will be shut down.
Thousands of Australian subcontractors continue to be forced into insolvency due to building and construction companies that are failing to pay, despite government attempts to address this issue, according to the Australian Subcontractors Association (ASA).
The ASA is calling on the Federal Government to step up and take responsibility before it’s too late as the collapse impacts thousands of subcontractors.
ASA spokesperson, Louise Stewart, said when companies collapse the domino effect can be devastating.
“Unfortunately, the subbies are often left to fend for themselves,” she said. “When companies fail to pay subcontractors for work done, the subbies still have to pay employee entitlements and taxes.”
A 2015 Senate inquiry into insolvency found that the industry is burdened every year by an estimated $3 billion in unpaid debts, including subcontractor payments.
In 2018 alone there have been 1,642 construction business that have become insolvent. A high percentage of these have been attributed to misconduct.
“Sadly, non-payment issues have long plagued the industry – as evidenced by one subcontractor to RCR Tomlinson that has lost $9 million due to the company not paying for work done,” 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.”
Stewart said one of the subcontractors, a family-owned business, has lost millions of dollars because of RCR delaying payments for over a year.
“It has decimated their business, and means hundreds of employees will be laid off,” she said.
The ASA has called on the federal Minister for Small Business, Michael McCormack to take action to protect subcontractors “all the way down the supply chain in the event of an insolvency”.
As part of the Federal Government's Review of Security of Payment Laws recommendations were made for cascading statutory trusts to be rolled out across the industry but so far no action has been taken.
“Legislation is needed to ensure cascading statutory trusts or cascading project bank accounts are mandated,” Stewart said.