Greatearth collapse: will more construction firms follow as reliefs and government help end
Fri, Aug 27, 2021 - 7:23 PM
UPDATED Fri, Aug 27, 2021 - 9:41 PM
https://www.businesstimes.com.sg/rea...overnment-help
Yong Jun Yuan
IN THE wake of news that Greatearth Corporation and Greatearth Construction have gone bust, lawyers working with construction companies said that factors like increased cost of materials and labour could deliver the same fate to more contractors.
On Wednesday, HDB informed affected homebuyers of five ongoing Build-To-Order (BTO) housing projects that there would be further delays as the two related contractors have run into "financial difficulties".
Another two public projects, the Mandai Crematorium and Columbarium under the National Environment Agency and the Gali Batu bus depot under the Land Transport Authority, could be held up as well.
In the first seven months of this year, Accounting and Corporate Regulatory Authority (ACRA) data showed that 1,324 business entities in the construction sector had ceased operations. This is marginally higher than the 1,282 entities recorded in the corresponding period last year, but still lower than the 1,422 entities recorded in the first seven months of 2019.
Derek Loh, a partner at Singapore-based TSMP Law Corporation, said employers may have refrained from pressing main contractors during the relief period due to the Covid-19 (Temporary Measures) Act. The act was amended on April 5 to extend the relief period for construction contracts, supply contracts or any performance bonds until Sept 30.
It was also amended to require the co-sharing of qualifying costs resulting from delays caused by the pandemic from April 7 to Sept 30 this year.
Both Mr Loh and Danna Er, a partner at Eldan Law LLP, noted that some stumbling blocks faced by contractors include increases in materials cost due to disruptions in supply chains, and labour-cost increases due to the manpower crunch that the industry is facing.
Ms Er said: "Construction companies that have been able to stay afloat during this difficult Covid-19 period have been able to do so because of a combination of strong financial reserves and government support received."
When these reliefs and other government assistance schemes end, these companies could resort to legal proceedings or face insolvency, she added.
Mr Loh also foresees that employers will need to shoulder some of these costs, or the financial health of the industry will worsen, resulting in more failures.
"This will be to the detriment of employers as well as they would have to employ replacement contractors who would naturally quote higher prices, thereby adding to the construction costs of employers," he said.