July / August 2014
www.waterfordpress.co.nz
Curvey magic Page 5
Lack of business skills a concern Hugh de Lacy It is a lack of basic business skills, rather than the post-earthquake workflow or the cost of health and safety provisions, that has been sending small Canterbury building businesses to the wall in unprecedented numbers this year, Fletcher Earthquake Recovery (EQR) says. In the first quarter of 2014 no fewer than 16 building businesses went into liquidation and three more into receivership – double last year’s number. Nor is the problem confined to Canterbury where more than $40 billion in insurance and government money is pouring into civil and building construction following the 2010-2011 quakes. Gavin Whiting, the contractor engagement manager at Fletcher EQR which has the
Earthquake Commission (EQC) contract to manage residential repairs up to $100,000, said many of the more than 1000 small contractors his company engaged “didn’t have a clue” about running a business. “It’s actually part of the culture of construction that these guys don’t ask each other or look for business help,” says Whiting, a former business coach. “The measure of success is the quality of a guy’s ute and tools – so if I’ve got a flash ute with my name on the side of it, then I’m successful, aren’t I?” Fletcher EQR’s $4 billion repair programme provided excellent cashflow to accredited contractors. “They get paid on a weekly basis once they submit their invoices, so they’ve got all this money but they don’t understand that providing for tax is so important right from day one.”
Whiting said he was aware when he took up the job that many of the contractors Fletcher EQR was accrediting were skilled workers attempting to make the step up to business ownership, and in the first year he encouraged them to get help under the Recover Canterbury programme. This was part of a government-funded joint initiative between the Canterbury Chamber of Commerce and the Canterbury Development Corporation, giving start-up businesses virtually free help and advice.“The uptake of that I could count on one hand,” Whiting said. Two factors often cited by the principals of the failed businesses was the uneven flow of work from Fletcher EQR, and the cost of implementing its health and safety regime. However, Whiting said it was not possible to provide every accredited contractor with a constant and unbroken flow of work.
He agreed that Fletcher EQR’s health and safety regime had come as a shock to many construction SMEs (small to medium-sized businesses) to whom high-vis vests and site-specific safety plans were an unwanted imposition. “They had to be brought kicking and screaming into 1992, because that’s when the [Health and Safety in Employment Act] made it a requirement to do a lot of this stuff, [and] the health and safety requirements are just part of doing business these days,” Whiting said. The chief executive of Registered Master Builders, Warwick Quinn, agreed that a lack of business skills was the main cause of the high number of failures in Canterbury. “But it’s not just a Canterbury problem,” Quinn told Building NZ. SMEs in the construction industry are falling over all the time because of a lack of business skills.”
New rules may hit investors Chris Hutching The Reserve Bank says its proposed new plans for residential investment are aimed at banks. But investors who own more than five properties are likely to feel the effects. The Bank is looking at rules that will require banks to hold different amounts of capital for residential mortgage loans than for business loans. The Reserve Bank’s external communications advisor Angus Barclay says the new rule applies to banks. “Property investors do not have to do anything. There is nothing they have to comply with.” However the rules are expected to result in banks reassessing their lending costs to investors. The background to the changes arise from an international standard for capital adequacy requirements as set by the Basel Committee on Banking Supervision, Barclay says. “Higher risk asset classes require banks to hold more capital against those exposures. As a general rule, the more capital a bank has to hold for a loan, the higher the pricing of that loan tends to be in the long term, although the short term impact on pricing may be weaker.” Barclay says residential mortgage loans are a sub-class within the retail asset class. “Basel II tends to restrict this sub asset class to owner-occupiers barring a few limited exceptions. Loans to property investors should be included in another asset class.”
INSIDE
New lift opens up winter wonderland... Queenstown’s Remarkables ski area is celebrating the opening of its new Curvey Basin chairlift. The 1.2km high-speed lift - a multi-million dollar investment - will open up new terrain on the mountain and has the capacity to carry 2400 passengers per hour. NZSki chief executive Paul Anderson said the developments at The Remarkables were part of NZSki’s commitment to continually improving the snowsports experience it offers its customers.
Kawarau Station snapped up - PAGE 2
Dreaming of coffee business - PAGE 3
Tax rules for excessive income - PAGE 4
“We’re focused on continued improvements and innovation. NZSki takes seriously its responsibility as a core part of the winter attraction market and knows how important that is to the wider tourism industry.” A new base building is set to open at the field next season. As well as opening up a wealth of new terrain, the Curvey Basin top terminal has a spectacular view of the ski area extending down the valley to the Wakatipu Basin and across to Coronet Peak. See story page 5
Recall expands Chch facility - PAGE 24
www.waterfordpress.co.nz