Construction report finds sector has a long way to go in wake of insolvencies

A "house of cards" is how the construction industry is being described as a report predicts more financial collapses could be on the way.

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The report found the sector’s making changes but it’s a long way from being fixed. Source: 1 NEWS

The Construction Pipeline report found while the sector has started making changes in the wake of those insolvencies - it's a long way from being fixed.

The report comes in the wake of collapses of big players such as Ebert and Arrow.

BDO report author James MacQueen, says there are a lot of construction companies feeling the pinch.

"We've got a two tier construction sector, we've got some companies who have lots of cash and are doing well and those ones are responding well in terms of where the sector is going but far too many companies still struggling," he says.

Forty per cent of respondents to the 2019 BDO Construction Survey have been affected by unreasonable disputes, of those, 45 per cent involved amounts over a hundred thousand dollars. 

In 2018, 37 per cent said they had work sorted for 12 months ahead. that's now dropped to just 19 per cent.

In Christchurch 45 per cent of companies have less than three months of forward work.

Rick Herd of Chistchurch’s, Naylor Love says there are just too many construction companies.

"The level of work has been plateauing and dropping off since the boom it's always been unsustainable a number of companies set up to take advantage of that work and now they are finding that work won't continue," he says.

However, Fletcher Buildings - who just 18 months ago faced tough financial times says its going to start bidding again for big construction projects.

It says that's partly due to improved market conditions, and the construction accord signed between Government and industry.

But the industry wants action as a result of that agreement to come faster.

"I  think a collaborative approach by our industry on how to tackle these problems that we have, and not people working in fractious silos or isolation from each other, I think it's very important for New Zealand including the construction industry that we come together to try and solve these problems that we have," says Quin Henderson of Southbase Constuction. 

The Government today released new processes for its contracts, the Minister for Building and Construction, Jenny Salesa says the  procurement process will ensure more people will be taken on to train and upskill.