At least one major New Zealand construction company is believed to be within days of having to lay off its staff because it does not qualify for covid-19 wage subsidies.
The company, which POLITIK has agreed not to name, is in talks with the Government over its promise to consider relief for medium and large companies on a case by case basis.
However, the clock is ticking, and no agreement has been reached.
The industry body, Infrastructure New Zealand yesterday reported that contracting and construction companies could let go of up to 30% of their staff within three months under the current conditions.
“In 6 months, those providing advisory and other support services will be in a similarly critical position,” CEO Paul Blair said.
Infrastructure NZ had surveyed 140 of their members last week, but there are reports across the industry that the situation has deteriorated since the survey was taken.
The big companies do not qualify for the wage subsidy but are supposed to do a one on one deal with the Government.
It is those negotiations which appear to be dragging.
The construction industry as a whole has been under liquidity pressure for some time now which seemed to be acknowledged yesterday with the NZ Transport Agency emailing contractors announcing that they would pay them in advance.
“Waka Kotahi, NZ Transport Agency, is offering advance payments to roading contractors so the industry will be ready to hit the ground running to deliver vital projects and help get New Zealand moving when the country moves out of the current Level 4 Covid-19 Alert lock down<” the email signed by the General manager of Transport Services, Brett Gliddon.
But the note hinted at the problems the industry is facing.
“I acknowledge the impacts on you, your employees, labour-hire staff and site-based subcontractors are significant and challenging,” it said.
“We know that any significant and prolonged disruption to the industry will inhibit both our and your ability to deliver future infrastructure for New Zealand and provide economic stimulus across the supply chain.
“In the current climate, the infrastructure pipeline for New Zealand is more critical than ever. Not only does New Zealand require this infrastructure, but its construction will also now play a key role in New Zealand’s economic recovery.”
A major announcement is expected this morning on a list of “shovel ready” projects that the Government will put out to tender as soon as Level Four is lifted.
But the situation is complex.
Many companies are not working for the Government but for private clients.
Infrastructure NZ held a webinar for its members yesterday about the situation. In notes of the webinar provided by a participant to POLITIK the challenge facing the industry was set out.
Participants were told the Infrastructure NZ survey found most organisations expected the Covid-19 impact to last for more than 12 months.
And it was suggested that the first challenge would come at the end of this week; then in the period up to the end of the current lockdown and then the third, after that.
All of those are points where companies could face real difficulties.
But there are political challenges ahead too.
NZ First, as the self-described party of the provinces with Shane Jone as Infrastructure Minister will be intimately involved in any programme to “build” our way out of the economic downturn.
The party has also historically favoured a strong role for Government in the economy. Hence, it is likely that if a large amount of Government funding were to go to big construction companies, NZ First would be keen to see it go as equity capital.
They might even go as far as to propose the revival of the Ministry of Works.
The party’s caucus yesterday is understood to have discussed the principles which should guide any injection of capital into private sector companies.
And they also discussed overseas-owned forestry companies with an intention that they be required to export unprocessed logs only after they have set up local manufacturing and processing facilities for timber.
NZ First is motivated by what everyone is now accepting will be a doubling or possibly tripling of unemployment figures.
Westpac Chief Economist, Dominick Stephens, yesterday forecast that around 207,000 jobs will be lost, equating to 7% of the workforce, because of the covid-19 lockdown.
That would push the unemployment rate to nine per cent; still below the 1991 peak of 10.6 per cent.
But Stephens is assuming that the country will be out of the lockdown at the end of April though regions may go in and out from then on.
That is a big call. Much will depend on how long future lockdowns last and what the full impact of closed borders will be.
POLITIK understands that some Government officials are now working on the assumption that unemployment will rise to 12 per cent — around 300,000 people.
However, yesterday’s increase of only 48 cases to give a total of 647 continued the falling growth rate trend, which began five days ago.
Whether this will continue is another unknown. Meanwhile, the Southern DHB, including Dunedin and Queenstown, has taken over as the area with the most cases.