Hard hit by criticial supply shortages. Photo / supplied
Hard hit by criticial supply shortages. Photo / supplied
Material supply shortages of at least two months are hurting the Covid-hit construction sector, which is running at maximum capacity and which has consents for $26 billion worth of annual residential and commercial work.
James MacQueen of BDO today released the firm's annual construction survey which found delays in gettinggoods were the sector's biggest problem.
The report said "56 per cent of respondents report delayed projects due to delayed receipt of materials and of 32 per cent of delays due to this exceed two months".
In May and June, BDO got 150 replies from shareholders, directors and senior staff in housing (51 per cent) and commercial (42 per cent), split between head contractors (67 per cent), subcontractors (20 per cent) and others including consultants and architects.
Product supply chain challenges were now the largest single contributor to project delays but there has been no significant change in the overall level of project delays since 2019 or pre-Covid, the report said.
Most construction firms expect the higher costs of inflation in the sector to flow on to clients and say that will be significant.
Skilled construction staff shortages were at the highest levels. Complex projects needed the experience that is gained on large overseas projects.
"That knowledge can then be passed on to the New Zealand workforce. We need to let those experienced people into the country," the report said.
Servicing specialist equipment also often needs people to travel from overseas.
"Without access to their expertise, we are continuing to inhibit our productivity, growth and transformation of the sector," the report said.
Half of the respondents said they would be significantly disrupted if existing work visas were not renewed or replacement immigrants permitted to enter New Zealand.
Not only is the industry short of skilled staff but, during the next decade, it is forecast to lose experienced leadership in nearly 70 per cent of organisations as people age.
StatsNZ data shows the sector is working at maximum capacity, with consents issued for 44,299 new homes in the year to June 2021 when $26.4b worth of work has been consented: $18.7b housing and $7.7b non-residential construction.
MacQueen said the sector was facing very challenging times.
"Construction businesses that anticipated, planned and negotiated contracts for these challenges should perform well. However, not everyone is in that situation and we will witness some collapses which will compound the challenges," he warned.
"Our current alert level 4 has potential to be a key turning point for the sector. The 2020 lockdowns quickly destroyed confidence in the local construction sector, with some companies losing virtually all of their planned forward work, and others losing a substantial portion," he said.
Companies then cut their pricing and margins because they were desperate to secure work for their employees.
"Some of those companies are doing those projects now and are treading water and struggling to make sufficient gross profit to cover overheads. On the upside, with reduced interest rates, travel restrictions and other changes, the demand for buildings - particularly housing - has picked up, and some companies experienced a better year in 2021 than in 2020," MacQueen said.
Today's report highlights that in the lead-up to the Delta outbreak, forward work rebounded to be particularly strong which was an encouraging sign, MacQueen said.
