Fletcher Building chief executive Ross Taylor at a media briefing following huge losses announced in 2018. Photo / Greg Bowker
Fletcher Building chief executive Ross Taylor at a media briefing following huge losses announced in 2018. Photo / Greg Bowker
If anyone had any questions about how difficult rebuilding the economy is going to be, Fletcher Building just provided a clear indication.
Yesterday's trading update on the effects of Covid-19 on the country's biggest building company will be devastating for those staff affected — potentially 1000 Fletcher workersin New Zealand and 500 in Australia face redundancy.
But it also gives a dose of hard reality to the economic impact of the four-week lockdown between March 26 and April 27.
Interestingly, Fletcher said it had recorded zero revenue in most of its New Zealand operations during the level 4 lockdown, while revenue in Australia ran at about 90 per cent of its prior expectations.
Construction is always one of the first industries to be hit in a downturn, but it is also often the first to show the green shoots of recovery.
And therein lies the problem. The Government is counting on the infrastructure sector to boom again with its plans to inject billions of dollars into "shovel-ready" projects.
Finance Minister Grant Robertson's Budget 2020 included an extra $3 billion for infrastructure with more expected as the Government seeks out projects to fast track. That is on top of the $12b allocated in January and will be welcomed by the likes of Fletcher Building.
However, while the extra spending will eventually be soaked up and create jobs, it will still take time for those projects to get under way, let alone come up with the workers with the right skills to do the job.
Mark Binns heads the Industry Reference Group that has been given the task of identifying projects which could be progressed quickly.
As a former Fletcher executive, he would know better than most the difference between shovel ready and "work ready" and that will be the issue in the near term.
Fletcher Building is making tough calls as the Covid-19 bites. Photo / JasonOxenham
Fletcher chief executive Ross Taylor said he expected the Government infrastructure spend will support the company's exposure to that sector but still expects work put in place to decrease by around 10 per cent in 2021 as new projects ramp up.
In other words it's a slower burn than the Budget headlines indicated and in the meantime Fletcher is forced to let go talented staff crucial for when that work does kick in.
Fletcher's predicament will be shared across the industry and unfortunately is a sign of the tough times ahead for the next few years.
It also signals the company isn't confident in the Government's ability to bring forward significant projects such as the state-owned houses promised in the Budget.
Taylor rightly says New Zealand is in a better position than many other countries but he knows full well there is significant economic pain to be had before we get there.
