CONSTRUCTION
April-May 2021 Reflecting this backdrop, the majority of survey respondents confirmed projects had been delayed or stalled. The impact of COVID-19 restrictions on the sector caused significant delays in many construction projects and flow-on consequences for subcontractor’s plans and workflow. Local authorities as key spenders on infrastructure experienced additional funding challenges, driving reductions or deferrals in expenditure. Many local authorities were impacted by a fall in revenue as a result of the economic downturn. These additional funding uncertainties and constraints have been cited in interviews as contributing to delays or cancellations in projects and/or maintenance activities. Firms have responded to reduced work and higher pipeline uncertainty by decreasing hours and more than 40 percent of businesses surveyed expected to decrease business capital investment and training budgets. The impact of the pandemic on the Sector is far from over and will persist into the future, but we expect the sector to bounce back faster relative to the Global Financial Crisis (GFC). It took the sector five years to recover from the GFC. We expect the rebound to be faster because the impact on the sector during the COVID-19 pandemic is being more driven by restrictions, rather than underlying demand and supply structure issues. There are four key factors that will impact recovery: - Regulation. The lifting of travel, physical distancing and gathering restrictions marked the start of in52
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frastructure-related construction recovery. Future changes to regulations will continue to influence recovery. - Public demand. Stimulus will underpin the recovery of public infrastructure-related construction sector demand. - Private demand. Slowing population growth and reduced economic activity result in less demand for new infrastructure and uncertainty further dampens investment. - Supply. Integral to recovery is the financial health and operation of infrastructure-related providers across the lifecycle of an infrastructure project. Access to credit and cashflow is a key aspect to recovery. The recovery of each sub-sector will be different. The study says the demand outlook over the next five years in horizontal construction to exceed the 2019 National Construction Pipeline forecast. Delivery of this pipeline may be constrained by the capacity of the sector to
deliver, particularly in key sub-sectors that are receiving the bulk of stimulus funding, and the ability of the sector to access required skills and labour. The demand outlook for vertical construction has been impacted more severely by COVID-19. We expect a dramatic drop in activity relative to the 2019 forecast before a recovery back to previously anticipated levels in 2025. Stimulus initiatives will provide some support to vertical construction but are unlikely to make-up the shortfall in demand associated with the cancellation of private sector developments. The demand outlook suggests capacity in horizontal construction may be constrained, while there is likely to be excess capacity in vertical construction. Survey respondents indicated 52 percent of horizontal and 33 percent of vertical firms can increase capacity by 10 percent to meet demand if there is an increase in volumes of
work. Only eight percent of horizontal firms can increase capacity by 30 percent and 14 percent of vertical firms. This indicates that the sector likely has the ability to sufficiently increase capacity to respond to the increase in demand for horizontal construction. The excess capacity in vertical construction likely presents a risk that capability and capacity could be lost over the coming years, potentially creating a challenge in the future. The findings of the report suggest challenges amplified by COVID-19 need to be considered as part of an action plan to capitalise on the opportunity that the current infrastructure stimulus presents for the recovery of the economy, and the sector itself. COVID-19 presents the opportunity to redefine the way we plan, pay for, and build infrastructure over the next three decades, the report concludes. Read the full report here
