26 Aug 2021

Construction staff and supply shortages: 'Very challenging times' - BDO

10:10 am on 26 August 2021

The construction sector needs a rethink as challenges posed by the pandemic place the future of some firms at the risk of failure.

A strong  man welder in brown uniform, a construction helmet and welders leathers, grinder metal an angle grinder  at the construction site, orange sparks fly to the sides

Photo: 123RF

Business advisory firm BDO's annual construction sector report shows the industry was struggling with product shortages and significant pressures from higher material costs and wages.

"With these factors combined, the sector is heading into very challenging times," BDO construction & real estate sector national leader James MacQueen said.

"Construction businesses that anticipated, planned and negotiated contracts for these challenges should perform well."

Not everyone was in that situation and there could be some collapses of firms operating on thin margins, which would compound the challenges, he said.

Supply chain disruption over the past 12 months which restricted the availability of certain products was now the biggest single contributor to construction delays.

More than half of firms said they could not receive key materials including steel, timber, and plywood when they needed them.

The competition for building products saw 70 percent of firms report that their margins had been eroded by the increased cost of materials.

The industry was also desperately short of labour, with less than 40 percent of firms saying they had enough staff to meet their needs.

Covid-19 border closures and the restrictions on immigration had meant many overseas workers had returned home or could not enter the country to fill gaps, the report said.

"Not only is the industry short of skilled staff, but over the next 10 years it will lose the experienced leadership across nearly 70 percent of the organisations in it," the report said.

That loss of experience in an industry with high risks, low margins and dramatic work cycles is likely to increase the number of weaker businesses without the ability to manage shocks, it said.

The report said a rethink was required to encourage the upskilling of staff, develop new approaches to procure materials and change how contracts were negotiated and priced, so they took inflation into account.

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