‘Dark day’ as giant retreats
The country’s biggest construction group is pulling out of ‘‘vertical construction’’, raising questions about who will fill the gap.
Fletcher Building’s building and interiors arm will stop bidding for work after fulfilling its contracts because of an estimated $660 million loss this financial year.
Geoff Hunt, chairman of the Construction Strategy Group, said it was a dark day for the New Zealand building industry.
‘‘The only firms operating in that sector with the balance sheet backing required to take on the size of projects commonly accepted by FB [Fletcher Building] are entities headquartered overseas.
‘‘While Fletcher Building technically is an offshore-owned entity, the reality is that it is widely considered to be an icon of New Zealand construction.’’
The B&I unit will no longer be involved in ‘‘vertical construction’’, meaning largely high-rise and commercial or government buildings. New chief executive Ross Taylor said that would probably remain the case indefinitely.
The way most contracts lumped the bulk of the risk on the lead contractor made for ‘‘very low margins and very high risk’’, Taylor said. However, he was not worried that Fletcher’s exit would leave a vacuum in the industry.
‘‘My experience in all these markets is, there’s always someone who seems to want to stump up for the revenue and risk … and I have no concerns the workload won’t get serviced in New Zealand. It just won’t be us.’’
Hunt said Fletcher’s troubles highlighted the danger of clients insisting on contractors accepting all the risk of late design and engineering changes.
Professor Robyn Phipps, of Massey University, said Fletcher’s exit from types of construction raised big questions in the near term about who of scale would come in to do the work.
Overseas companies were waiting in the wings, or already here, but ‘‘it’s absolutely critical that we have New Zealand investment and New Zealand capacity in vertical construction.
‘‘Because if we don’t … then we leave ourselves open for overseas contractors to come in, and they walk in and walk out.’’