Outlook positive despite Mainzeal collapse

Last updated 08:29 11/02/2013

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The collapse of the country's third-largest construction company will be just a "blip" in six months' time, the head of a major construction firm says.

Arrow International chief executive Hugh Morrison says the construction industry in New Zealand is robust, and the sector would absorb the collapse of Mainzeal Property and Construction and move on.

"Let's not overreact to the Mainzeal situation as a commentary on where the market is," Morrison said.

The construction industry had slid back over the last four or five years, but prior to 2008 or 2009, it was probably around levels not too dissimilar from where it was now, Morrison said.

The receivership of Mainzeal was a major blow to staff, subcontractors and suppliers, with the market the toughest it had been for at least five years, but the industry itself was not in crisis.

Morrison said he believed there was enough capacity in the construction industry to absorb those who lost their jobs as a result of the collapse.

"Yes I believe they will be absorbed reasonably quickly . . . I think all companies have cut their staff pretty tightly.

"Somebody has to do the job somewhere and the market is quite tight resource-wise."

The industry in Christchurch would continue to absorb people, he said.

"There won't be a long- term impact on the market, I don't believe."

In the broader construction industry in New Zealand there was activity in sectors like education, with work on the go for schools, universities and other tertiary institutions.

The Christchurch rebuild was also generating a bit of work although significant volumes of work had yet to come onstream, while in Wellington clients were looking at their seismic exposure, and in Dunedin the university was driving some work, Morrison said.

"That's the underbelly, if you like, that keeps ticking away. There is certainly a level of activity."

It was not all "doom and gloom" for the construction industry, Morrison said.

"It is such a robust industry it will absorb this knock, regrettably for the people suffering, it will absorb it very quickly."

The Christchurch and Auckland markets were starting to move, and residential housing was picking up.

"Within six months I'd say this would just be a blip on our memories and we'll be pushing on, regrettably for the people suffering now, because they are the ones who will have to do the hard work to find the new opportunities," he said.

However, he believed there were opportunities out there for them.

But throughout the industry margins were very tight.

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Large volumes of work had yet to come through from the "Christchurch saviour" but the forecast, driven by Christchurch, was optimistic. As the work flowed through the margins would start to move.

Supplier margins were not yet moving that much and contractors' margins would later start to move, but slowly, Morrison said.

- BusinessDay.co.nz


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