Effects of Covid19 still concerning a now cautious construction sector
AUCKLAND: About 500 New Zealand building projects have been cancelled due to Covid19 this year, Building and Construction Minister Poto Williams has been told.
In one of the many ministerial briefing papers out yesterday, the Ministry of Business, Innovation and Employment told Ms Williams of the toll the pandemic took on the sector.
‘‘While it is still too early to precisely estimate the impact of Covid19 on the building and construction sector, research found that approximately 200 known construction projects were impacted by Covid at the start of April, with this figure rising to near 500 known projects in August,’’ the paper said.
The building and construction sector is New Zealand’s fourthlargest employer. It employs about 259,000 people and accounts for just under 10% of the country’s workforce.
The sector contributed $16.19 billion to New Zealand’s gross domestic product in the year ended June 2020. This is about 6% of the total GDP. According to an estimate by PricewaterhouseCoopers in 2016, every $1 invested in the building and construction sector produced between $2.51 and $3.11 in economic activity, the briefing paper said.
It cited the research on cancelled projects as coming from Pacifecon. Pacifecon has reported on projects worth about $551 million being cancelled.
‘‘Projects are cancelled for various reasons: the developer has changed their mind, the site has been sold, reasons outside the developers’ control prevent progress,’’ the report said.
‘‘More projects are now on hold as some companies are taking a cautious approach to see how the economy progresses in the coming months. Budgets have been reexamined.
In Christchurch, we have heard of contractors scratching around for work, with larger developers holding off and margins dropping. Recent Christchurch building consents have dropped in number with not many commercial projects,’’ Pacifecon said.
Many businesses reported that while they were busy, they were mindful of possible changes once the wage subsidies and mortgage holidays finished but were not totally sure what would happen.
‘‘Many of our contacts say there are many planned projects out there, but due to lack of surety as to the economic future, nobody wants to make hasty decisions,’’ the business found.
‘‘Due to necessary redundancies already happened, some companies are no longer able to tender for large projects, looking at smaller opportunities to keep the business going.
‘‘Cashflow remains tight for many companies,’’ Pacifecon said.
The sector was also suffering delays in getting products here from overseas, Australia in particular.
There had been very little delay in imported product coming by sea, but delays have affected supply via air freight,
Pacifecon reported.
A BDO survey out last month showed Covid’s biggest effect was rising uncertainty about future work because 69% of respondents had had contracts cancelled or delayed lately.
Falling margins were the secondbiggest worry as builders competed against each other with low bidding.
Building contractors said average gross profit margins on jobs were 7% to 9% but, postCovid, builders were more desperate for work so a few were cutting margins.
A quarter of respondents planned to reduce staff and 42%, twice as many as last year, suffered delays of more than three months on their jobs, the BDO survey reported. — The New Zealand Herald