It’s all over the news that business and consumer confidence is low and that Australia and other Western economies are heading for tough times. Money is tight, many business sales are falling and company directors are wondering whether their business will survive the downturn.
The spectre of job losses is looming across the general economy as the financial jitters spread out across numerous industries including the Quantity Surveying and Construction sectors.
Construction has been following a steady path during the past decade with continual single digit growth in output. The rises have not been as spectacular as other sectors, but the flipside is that it is predicted that the fallout from the current economic troubles will be nowhere near as severe. However, it is clear that this sector like many others is not immune from the crunch.
The private building sectors have been the hardest hit with many banks developing cold feet and becoming more cautious in funding new projects. Private infrastructure spending is still rising, but apart from that, things are gloomy, which shows how important public spending is.
Alastair McMichael, a Director of Rider Levett Bucknall agrees that the private infrastructure sector has been impacted significantly with “numerous projects put on hold or cancelled due to the shockwaves that are travelling through the Quantity Surveying and Commercial Construction sectors.”
McMichael’s predicts that their workload in the New Year could potentially be “substantially reduced and we will be looking into new opportunities as internal resources become more available.”
Rachel Callaway, National Research Manager of Davis Langdon explains despite the doom and gloom, on a “global level we have seen a lot of former expats returning to Australia as they are no longer required in international jobs. Therefore we are seeing a higher calibre of candidates in our industry.”
“This time last year everyone was screaming skills shortage, now the tables have turned dramatically. Economically, it will take awhile for the situation to turn however the government’s quick act to inject money into the infrastructure sector will help.”
It is evident that the outlook for the construction industry is somewhat cloudy with revenue expected to increase by only 4% in 2009-10 and just 2% in 2010-11. Although, despite this somewhat disappointing prediction, there is still hope with it forecasted that there will be nearly 90,000 construction workers needed every year between now and 2012.
A Director of a National Infrastructure Organisation says “despite the obvious slow down, we won’t be changing our area of focus too much during 2009. If we were purely a building company we would notice a more substantial slow down but because we are well diversified we will have enough to keep us going.”
“The current economic climate will see project funding becoming much harder to secure and will probably never revert to that of the past few years. You will need to have a fundamentally secured project to receive funding, including excellent fundamentals, and larger equity invested with less debt. 2009 will start off very flat and probably wont get up and running until the first half of 2010 where more stimuli will come back into the economy.”
A Project Manager of a National Construction Company agrees that “You currently have to look at projects in cycles as a job we start now won't be finished for nearly two years and the economic climate might be different by then. Everyone knows there is a shortage of housing as the demand is there, the problem is affordability and finance.”
“We are still expanding as a company because the work is still coming through. If residential wobbles a bit then we are looking at other areas such as hotel construction, which is booming. All our skills are transferable between the two, so you just have to adapt when things get a little tighter.”
Director of Conduit Recruitment Adam Walker says that recruitment in the construction sector has also been hit by the downturn. “We have found that most of our clients are either laying people off or have established a recruitment freeze.”
“As far as recruitment in construction is concerned, what we are finding is that there are a lack of vacant positions but also a lack of candidates as the quality candidates have not been let go. Smart companies are using this time to attract candidates who may not have been available in busier times.”
Conduit Recruitment Construction Consultant Greg Ford agrees that “there is an enormous amount of uncertainty in the sector. We are finding that many of our clients have had projects cease or be put on hold, but for some construction companies it is a question of adapting and moving into other areas where work is still ongoing.”
“The beginning of 2009 has seen many of our clients madly tendering with predictions that it will be quiet for most of 2009. We have found that many of our clients have switched their focus from placing permanent roles to contract.”
As for the overall prediction of what 2009 will bring, the building sector will suffer as long as private development has all but stopped. Building will most probably stagnate, infrastructure remuneration might continue to move upwards but it won’t increase at the rate it has in the past.
Alastair McMichael says that during 2009 they will be “sitting tight and keeping our existing team together.”
Adam Walker agrees that there is a lot of “wait and see for clients in the construction and infrastructure sector, although the search for hard to find specialist skilled workers such as client estimators has not ceased.”
“In terms of the skills shortage, there will always be a skills shortage in the construction and quantity surveying space. Although there are presently fewer jobs available because of the climate, when things start to pick up the shortage will not have disappeared.”
The economic downturn has caused a construction slump as these leading construction professionals have revealed, and although there is a vast array of prediction and opinion, the general consensus seems to be that we will have ‘to wait and see’.
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