The results are in: BDO’s latest construction survey report

BDO New Zealand recently undertook a comprehensive survey of almost 100 New Zealand construction companies, with the aim of providing a useful insight into the reality of the New Zealand construction sector as it stands today. A full copy of the report containing the survey can be found here.

The survey results highlight some clear challenges facing the construction industry today. Nevertheless, the industry remains largely optimistic growth rates will continue to rise, fuelled in part by the government’s ambitious plans for housing and infrastructure over the next decade.

We summarise some of the reported highlights and challenges below.

Highlights in the industryChallenges facing the industry
The pipeline of work is strong

94% of companies said they had sufficient confirmed work for the next 3 to 12 months.

Adequate advice on business planning

An encouraging proportion of companies felt they were getting the advice they required regarding financial and business planning. However, 20% of companies reported that they do not prepare budgets or have a business plan.

_ Industry optimism

Between 71% and 78% of companies predicted some level of growth in their sector – across all sectors (Housing, Commercial, Construction) and at Sub-contractor level.

Availability and quality of staff

Staff related matters are the biggest concern for the construction industry. Two thirds of companies surveyed said they are looking for more staff.

Project delays

Commercial and housing companies (large and small) are facing issues with project delays, with a significant proportion of projects reported as being delayed for 3-6 months.

Tight margins

Companies reported that poor profit margins are a challenge being faced nationwide in the industry, particularly for smaller companies which do not have the resources to undertake larger projects with better margins.

Inability to obtain additional performance bonds

With banks and insurers taking a more cautious approach to issuing performance bonds, bonding is the second biggest concern for companies with turnover of over $10M.

Key Recommendations

Companies should consider:

  1. Obtaining legal advice on the recently enacted mandatory retention regime (via the Construction Contracts Amendment Act 2015).

    The regime appears to be poorly understood in the industry, which can lead to future retentions issues.

  2. Using their permitted rights under the Construction Contracts Amendment Act 2015 to inspect their clients’ trust records in order to confirm that any retentions are held in trust.

    10% of companies surveyed identified at least 1 client that was not holding retention funds on trust, or did not have a legally compliant alternative instrument in place, such as products being offered by some insurance providers. See our article on retentions here.

  3. Using recruitment agencies to address their staffing issues.

    The report found that companies who used agencies experienced less trouble meeting their recruitment needs than those who rely on word of mouth or do their own advertising.

We recommend you read the Full Report for a comprehensive understanding of the current state of the industry. For advice on any of the issues arising out of the Construction Contracts Act, contact one of our experts.

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