551 Construction Companies Vanished in a Year. What Does That Mean for Your Next Project?
By the end of 2025, New Zealand had 551 fewer registered building and construction companies than it did the year before. Not 551 that quietly wound down after a slow trading year. A large share of those exits came through liquidation, on the back of two of the hardest years the sector has had in a while.
That's the stat I came across this week that I haven't been able to stop thinking about, for a different reason than you might expect.
This week's EM Fridays isn't really going to talk about the failure of the construction companies or how to survive in the market. It is going to talk about who you might be signing a contract with right now, and, just as importantly, what kind of price you might be putting your own name to if you're the one submitting the tender.
I want to look at this from both sides this week, because the conditions producing that 551 figure cut both ways. If you're procuring work, they change how carefully you need to look at who you're contracting with. If you're pricing work, they change what a "safe" price actually looks like right now.
Where the industry actually sits
The current data suggests the businesses still standing are managing their debt better through the first half of 2026 than they were a year ago. That's a genuine positive sign, and it likely means some of the weakest players have already exited rather than limped on for another cycle.
But "fewer, steadier businesses" is not the same as "a healthy market." What I'm seeing in the data isn't a bounce-back. It's a market being forced into more discipline than it's used to, off the back of a couple of years of cost escalation, labour shortages and tight finance. Stabilising, yes. Springing back, not yet.
At the same time, the way work is being awarded has shifted. More risk is being passed down to contractors and subcontractors, while increasingly competitive pricing is expected as more businesses compete for a smaller pool of projects. Fewer projects, more bidders, tighter margins, and less room in each bid to absorb a mistake. That combination is worth paying attention to, whichever side of the table you’re on.
Here's what concerns me
Fewer companies. Thinner margins. More price-led tendering. Each one of those is manageable in isolation. Together, they describe exactly the conditions that produce underpricing.
When work is scarce and margins are already thin, a contractor doesn't need to be reckless to submit a price they can't actually sustain. They just need to be desperate enough to win the next job, because the next job is what keeps the business trading through the tough time. That's not a character flaw. It's what a tight market does to pricing behaviour across an entire sector, and it's precisely the environment we're in right now.
The uncomfortable part is that this is exactly the moment a lot of procurement teams relax their guard rather than tighten it. Budgets are under pressure, so the lowest number on the page looks even more attractive than usual. But a market shedding hundreds of companies a year is not the moment to be less curious about who you're contracting with. It's the moment to be more curious.
A tight market doesn't just eliminate weak contractors. It also pushes surviving ones to price like they're weak, just to keep winning work. Your due diligence needs to work harder exactly when your budget is telling you to relax it.
If you are awarding the work
This isn't about avoiding smaller or newer contractors, plenty of them are exactly who you should be working with. It's about matching your due diligence to the market you're actually operating in, rather than the one you were operating in three years ago.
Ask for more than a credit check.
A clean credit report today doesn't tell you whether a contractor's pricing on your specific job is sustainable. Ask how they've priced the risk items, not just the total.
Check retentions and payment terms are actually protective, not just present.
A retentions and payment clause that exists on paper means very little if it isn't structured to actually be there when you need it.
Weight financial resilience properly in your evaluation, not as a pass/fail gate.
In a market this tight, resilience is a genuine point of difference between two similarly priced tenderers, and it deserves real marks, not a tick box.
Revisit packages that were awarded eighteen months ago.
A contractor who was financially solid at award may not be in the same position now. It costs very little to check in.
If you're pricing the work
I don't want this to read as an article aimed only at procurement teams, because the same conditions creating this risk for clients are putting genuine pressure on contractors and subcontractors trying to price competitively without pricing themselves into a corner. If that's you right now, there are a few things worth checking before you submit.
Price your risk items honestly, even when it costs you the tender.
In a market this competitive, the temptation is to trim the contingency line to get the total down. That contingency exists because the risk is real, not because it's negotiable. A job that looks won on paper but can't absorb its first unexpected cost isn't a win.
Build retentions and payment terms into your cash flow modelling, not just your margin.
A healthy margin on paper doesn't help you if the timing of payments leaves you funding the client's project out of your own working capital for months at a time. Know exactly how long you can carry that gap before you sign.
Be as selective about your clients as you'd want them to be about you.
Due diligence isn't a one-way street. A financially unstable client is exactly as dangerous to you as an unstable subcontractor is to a main contractor, and it's a question worth asking before you commit resources, not after payment goes quiet.
Have an honest conversation about price with the client, rather than a silent one with your own margin.
If a scope genuinely can't be delivered for the budget on the table, saying so, and explaining why, protects your business far more than winning the job on a number you already suspect you can't hold.
None of this means walking away from competitive tendering. It means treating your own price with the same scrutiny you'd want a client to apply to you.
The bigger picture
None of this means the sector is heading for collapse. A reset is not the same as a crisis, and there are genuine signs of stabilising conditions underneath the caution. But a market that has shed 551 compnies in a year, while asking the survivors to compete harder on price than they have in years, is not a market where either side of the contract can afford to be passive.
The businesses that come through this period well won't be the ones who tendered the most packages, or won the most jobs. They'll be the ones who knew exactly who they were signing with, and exactly what they were signing up to.
Have a great weekend.
Emmolina
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Emmolina May is a Registered Quantity Surveyor, contract specialist, educator and dispute resolution practitioner based in New Zealand. She helps contractors, subcontractors and developers understand contractual risks, negotiate clearer terms, improve procurement and commercial strategies, and resolve disputes when they arise.
