Insolvency in the Construction Sector: Global Research Insights and Empirical Evidence from Australia

The construction sector continues to experience elevated levels of insolvency, driven by an interplay of structural vulnerabilities and macroeconomic pressures, including supply chain disruptions and cost inflation. These challenges have been particularly prominent in Australia, especially among micro and small construction firms, which account for over 90% of reported insolvency cases. In 2024, the Australian construction sector contributed nearly one-quarter of all company insolvencies nationally. This study undertakes a comprehensive review of construction insolvency research, synthesising key themes, causes, early warning indicators, and mitigation strategies, while contextualising global insights using empirical evidence from the Australian construction sector. The methodology integrated systematic literature screening, scientometric analysis, and critical thematic synthesis with a descriptive and selective statistical examination of the Australian Securities and Investments Commission (ASIC) data, complemented by practice-informed insights. The review identified dominant research trajectories, centred on financial risk management, insolvency prediction models, project-level cost and governance risks, and emerging data-driven approaches. Empirical analysis revealed that inadequate cash flow (~16–20%), poor strategic management (~12–18%), and weak financial controls (~11–15%) consistently rank among the leading causes of construction firm failure over the last decade. Indicators such as non-payment of statutory obligations and deteriorating working capital are observed in over half of insolvency cases, highlighting persistent structural fragility. Although global strategic focus areas emphasised financial monitoring and early warning systems, practice-informed findings indicated that effective mitigation requires their operationalisation through capability development, early intervention tools, regulatory oversight, and stakeholder-informed support mechanisms. The study shows how global insolvency risk concepts align with Australian regulatory evidence and highlights the need to translate early-warning approaches into accessible tools and support mechanisms for micro and small construction firms.