"I don't do residential" is no vaccination against the Contagion Risk.

If you walk into a boardroom in January 2026, you’ll hear a tale of two economies.

On one side of the table, the BD Manager is bullish. The pipeline is huge ($1.14 trillion according to Infrastructure Australia); government funding is secure and stable; the biggest problem is finding enough warm bodies to do the work.

On the other side, the CFO is sweating. Insolvencies are at record highs, margins are non-existent, and every week brings news of another mid-tier builder hitting the wall.

Most Infrastructure professionals look at the residential carnage and think: “Sad for them, but it doesn't affect me. I’m on a Government-funded hospital. We’re sorted.”

Wrong.

In 2026, the firewall between "Residential" and "Infrastructure" has crumbled. We’re seeing the Contagion Effect putting major commercial and infrastructure projects at risk from residential failures, especially so in metro regions.

The Virus Jumps the Fence

The contagion doesn't travel through the Head Contractors; it travels through the Supply Chain.

Your project might be a secure Government rail upgrade. But your electrical subbie is also working on a 50-unit apartment block down the road.

When the Developer of that apartment block goes bust (a common story in FY25/26), they stiff the sparkie for $400k.

Suddenly, that sparkie has a cash flow hole they can't fill. They stop paying their wholesalers. They can't make payroll on your site. They go into administration.

Overnight, your "safe" infrastructure project has lost a critical trade, and you are facing a 12-week delay to re-procure, and the new subbie is never anywhere as cheap as the original bloke 6 months ago.

The Data is Just Plain Ugly

The numbers confirm this risk is increasing rapidly:

• Record Failures: ASIC data shows construction insolvencies hit nearly 4,900 in FY25, almost triple the figures from three years ago.

• The Hotspots: CreditorWatch identifies South-East Queensland and Western Sydney as the highest-risk regions for business failure.

• The Supply Chain Squeeze: subbies are carrying twice as much unsecured trade credit risk as other businesses. They’re the bank for the industry, and the bank is running out of cash.

View from The Bench

If you’re a Project Director on a major infrastructure project, you need to look beyond your own fences.

We’re advising our clients to run a ‘Supply Chain Audit’ immediately. Don't just ask your key subbies if they are solvent. Ask them:

1. "What percentage of your book is currently residential?"

2. "Who are your top 3 debtors right now?"

3. "If your biggest private client went bust tomorrow, could you still finish my job?"

If the answer is No, you have a risk to manage.

References

• Infrastructure Australia: 2025 Market Capacity Report ($1.14T Pipeline)

• Ironbridge Legal / ASIC: Navigating Construction Insolvency (4,900 failures in FY25)

• CreditorWatch: Business Risk Index Jan 2026 (High Risk Regions)