Financial strain has hit just about every industry during the pandemic, and while there’s been a number of buildings seen on the up and up, the requirements of self isolation and the subsequent delays are being felt hard in the construction industry.
Last week, Wilson Bayly Holmes-Ovcon (WBHO) went into voluntary liquidation, with their company Probuild leaving over 800 employees and 2,000 creditors in the lurch; to the tune of $14 million. With the recent rain bomb that has hit the eastern seaboard, a number of Probuild sites have been left damaged, creating further headaches for Deloitte, the administrator tasked with delving through the mess.
Before the rains came down, approximately $5 billion worth of projects across the country were being pitched to investors and developers in a bid to ensure they are completed. But with labour and material costs at a premium and isolation regulations causing delays, it may not just be Probuild that goes under.
“In common with other industries, Covid-19 has created many challenges for the Construction Industry,” says Australian Constructors Association CEO, Jon Davies.
“It’s most certainly being felt currently in the commercial build sector, where contracts typically do not provide pandemic relief and contractors run the risk of incurring delay penalties if time lost through COVID related shut downs and absenteeism cannot be recovered.”
For now, it seems as if government intervention will not be forthcoming. Data cited by the Morrison Government from the Australian Securities and Investments Commission shows there were 46 percent less companies going into administrations in 2021 compared to 2019.
Davies says the potential is there for the Federal Government to take action.
“The best support that the Federal Government could provide to the construction industry is to incentivise reform of how projects are procured and delivered in order to promote increased collaboration and a more equitable sharing of project risk,” he says.
“We have proposed a national project rating scheme as a way to do this. The Future Australia Infrastructure (FAIR) rating would rate projects on a number of key reform areas and the scores would be made public to drive progress.”
Probuild has been the scene of struggle for sometime, with WBHO looking to sell the company to the China State Construction Engineering Corporation for around $300 million. It was rejected by the Australian Foreign Investment Review Board. The company says Covid restrictions have effectively fast tracked its demise.
“The impact of lockdown restrictions on the retail, hotel and leisure and commercial office sectors of building markets created high levels of business uncertainty in Australia and significantly reduced demand and delayed the award of new projects in these key sectors of the construction industry,” a Probuild statement reads.
Davies says the construction industry is a major player in the Commonwealth’s economic recovery post-pandemic, and that the current hardships being faced by the industry may well lead to a stronger future.
“Governments are relying on the construction industry to lead the economy forward through the construction of a record pipeline of economic enabling infrastructure. Delivery of this pipeline is at risk if underlying industry sustainability issues are not addressed.
“The COVID pandemic therefore provides a once in a generation opportunity to address industry issues for the benefit of all Australians. This will not happen overnight but importantly, change is coming.”
Image: The Probuild-constructed Queen & Collins precinct in Melbourne’s CBD, designed by BVN and Kerstin Thompson Architects.
