Mainzeal predicted to hurt industry

Mainzeal's collapse earlier this year has lead to downstream job losses, including 18 at Hill's Flooring. Photo / Natalie Slade

If work on Mainzeal Property and Construction's sites is frozen for another six weeks, national construction activity could be depressed by up to 3 per cent, says an economist.

Gareth Kiernan, Infometrics managing director, said the receivership of such a big firm would have an effect on GDP.

"Some may postulate that the total impact will be larger because of the potential flow-on effects for subcontracting firms as well as a hit to broader economic confidence," Kiernan said.

"My response to that would be that the 3 per cent hit to nationwide construction activity assumes that the workers and subcontractors who would have been employed on Mainzeal's projects in February and March do not do any other work in the meantime - a reasonably extreme and pessimistic assumption," he said.

"If at least some of the subcontractors move on to other work, then it will reduce the magnitude of the 3 per cent knock to construction.

"This provides some wriggle room if we think there are flow-on effects for the broader economy from Mainzeal's collapse, such as the non-payment for other completed work reducing other firms' incomes and profits and, ultimately, consumer spending, as well as some more nebulous effect on confidence."

The receivership could cause a reduction in subcontracting capacity if firms go out of business and Kiernan wanted the Government to liaise with banks to mitigate the financial fallout, particularly because of the looming substantial growth in demand for workers in Canterbury over the next two years.

"In terms of genuine construction capacity though, the loss of Mainzeal represents a short-term hit but I would ultimately expect staff and other resources to be redeployed within the industry in as far as they can be profitably utilised, so I don't expect any lingering effects on the industry's capacity for non-residential or infrastructure activity," he said.

Phil McConchie, co-owner of scaffolder Camelspace, is retrieving further equipment from the leaky Hobson Gardens twin-towers in Auckland after taking some equipment in a controversial step the weekend after the receivership. Scaffolding is to be removed down to level four.

"Tower One is two-thirds down but still to full height around the back. We haven't started on Tower Two. We take it down in vertical strips," McConchie said last week.

Camelspace was not in financial trouble, he said "but it's a big hit on our profit for the year", he said of the $300,000 Mainzeal owes to his business.

PwC receiver Colin McCloy said Mainzeal was still being assessed and it was too early to release information.