Builders struggle in wait for rebuild
Christchurch's rebuild has not proved the goldmine some construction firms thought it would be.
Industry players say the rebuild was initially expected to peak in 2015-16, but it now looked more likely to be in 2016-17.
In the meantime, under-pressure firms were accepting lower margins, holding off employing staff or simply packing it in.
Insolvency firm McDonald Vague highlighted issues facing construction companies in the rebuild in a newsletter yesterday.
Comparing common causes of construction company failures with the problems facing firms in Christchurch, there appeared to be "a high chance of another significant construction company collapse" like that of Mainzeal, the firm said.
The warning follows City Care revealing in the past week a dramatic drop in profit because of growing rapidly in expectation of work that is slower in arriving than the city council-owned maintenance and construction firm anticipated.
McDonald Vague said common causes of construction firm failures included tight margins, insufficient capital, inability to manage growth, competition, inaccurate tendering and poor pricing decisions.
Construction companies waiting for the Christchurch rebuild to kick in faced a lack of progress in the central-city rebuild, increased competition, rising costs and cashflow constraints. The length of time it took for retentions to be paid added to the pressure.
Smith Crane and Construction managing director Tim Smith said he would not take on many extra staff until the rebuild gathered steam.
"Larger construction companies have ramped up staff and overheads quite significantly on the proviso that there was going to be a lot more work, and I don't think the work is there that they thought was going to be," he said.
Some out-of-town firms had tried to cash in on the rebuild "and I think a lot of them have packed up and gone because it hasn't been the boom they thought it was going to be, so a lot of them have gone back to their respective home towns".
The rebuild had started gaining traction only in the past few months, he said.
The firm has 200 staff nationwide, including about 150 in Christchurch.
Project management firm Project 1 Design director Marc Findlay said there was increased competition, and material prices were going up.
Firms needed to understand how they would be paid, particularly regarding retentions and the length of time it would take to get paid.
A few out-of-town firms had decided to leave Christchurch, particularly if something went wrong and they had to come back to fix things.
"I know a couple of instances where they think this is too hard, we're just walking away, regardless of being paid or not," he said.
- © Fairfax NZ News
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