Industry Insights
The State of Construction in 2026
The construction industry enters 2026 with a mixed outlook. Public infrastructure remains a key source of activity, supported by ongoing government investment, while residential and commercial projects continue to soften due to elevated interest rates and tighter feasibility settings.
At the same time, builders are under pressure from rising input costs, ongoing labour shortages, cash‑flow stress and increasing compliance obligations, all contributing to margin compression and heightened financial risk, particularly for smaller operators.
Despite the headwinds, opportunities exist. Infrastructure, multi‑residential construction, technology adoption and sustainable building practices are emerging as areas of growth for well‑positioned firms.
Industry Pressures: Why Margins Are Under Strain
Builders are being squeezed by higher input costs, labour shortages and a rise in insolvencies across the sector. More than 2,800 insolvencies were recorded in FY2024 — a stark reminder of the importance of strong commercial discipline.
As demand from public works continues, profitability in 2026 will hinge on accurate budgeting, escalation planning, tight scopes and real time job control. These fundamentals now serve as the baseline for sustainable performance.
Top tips for construction in 2026
- Protect cash flow.
Robust cash-flow management will make or break many businesses. Rolling forecasts and contingencies, disciplined spend pacing and aligning payment terms with inflows create early visibility and reduce crisis risk. - Avoid unpriced risk.
Limit fixed‑price exposure where possible or ensure escalation clauses are clearly embedded. Re‑price long‑lead items before ordering and pass‑through cost adjustments where the market allows. - Know your margins daily.
Profitability depends on real-tie oversight. Track labour, materials, plant and subcontractors daily and close the loop between site and finance so insights lead to action – not post-month-end surprises. - Workforce strategy: Balance apprentices and subcontractors.
A trained core workforce paired with flexible subcontractor capacity supports both capability and scalability. Apprentices unlock incentives and build firm specific skills, while subcontractors help manage peaks, but demand tight scopes, progress verification and compliance checks (TPAR/Licencing/Insurance) are tight. - Job management technology.
Integrated job systems provide live control over estimating, scheduling, timesheets, variations and purchasing. Connecting operations to finance allows dashboards and alerts to flag margin slippage early. - Strengthen relationships.
Proactive communication with clients, suppliers and crews helps surface issues early and speeds up progress claims and variation approvals. - Stay compliant.
Safety, quality and regulatory remain essential. Avoid costly penalties and protecting reputation during times when margins are tight.
Where a Business Advisor Adds Value
Construction is a high risk, low margin environment, and strong financial discipline is often the difference between sustainable growth and solvency pressure. A strategic business advisor helps builders shape a pipeline they can deliver profitably by supporting:
- Strategy and pipeline planning
Prioritise sectors and aligned to your capability and margin profile. Sequence bids to match capacity and avoid stacking risk. - Pricing, tenders and contracts
Use live cost data, ensure escalation and variation mechanisms are embedded, and de-risk contract terms such as LDs, retentions and scope creep. Protect the margin before the job begins. - Cash flow and funding
Run rolling 13-week forecasts, aligned payment terms and the right mix of facilities (overdraft, trade, asset or debtor finance), ensure WIP converts reliably to cash. - Job costing and reporting
Daily capture of labour, materials, plant and subcontractors paired with WIP reviews and exception dashboards ensures issues trigger immediate action. - Technology and job systems
Implement an end-to-end job platform from estimating – scheduling – field capture – purchasing – invoicing, integrated with accounting and reporting, to automate alerts and tighten control without adding administration. - Risk, compliance and escalation management
Standardise change control, evidence claims thoroughly, and monitor solvency indicators like aged WIP, retentions and margin erosion. Lock in supplier pricing and use back-to-back escalation to protect fixed price work.
Case Study: Managing ATO Debt and Cash Flow
A large civil contractor facing mounting ATO debt and tighter enforcement conditions engaged our team to stabilise cash flow. We prepared a detailed FY2026 cash‑flow budget and coordinated refinancing with a third‑party financier at more competitive rates than standard ATO payment plans.
Following legislative changes on 1 July 2025, which removed the deductibility of ATO interest, refinancing ensured interest remained tax‑deductible, improving the after‑tax cost of funding and strengthening cash‑flow position.
The outcome: improved cash flow, on‑time ATO obligations and significantly reduced compliance risk
How we support construction businesses
We work extensively with residential, commercial, civil and trade-based construction businesses, providing support ranging from accounting and tax compliance to strategic advisory, systems improvement and risk management
Our deep sector experience ensures practical, industry-informed insights that help builders manage risk, improve performance and build sustainable businesses.
About the Author:
Jack Hill is a Senior Adviser, Business Advisory at Moore Australia in Adelaide. With a strong background in property and construction, Jack’s passion is providing businesses with holistic, actionable advice to help them thrive.
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Turn 2026’s challenges into opportunity — connect with us to build stronger financial discipline, better visibility and a more resilient construction business.
