Masco Group’s Managing Director Abdul Majid shares our perspective on the Greater Sydney construction shutdown. He explains why government action has been ill-conceived and doesn’t consider the lags, delays, and cash flow crisis it will create in the industry
The last few weeks have been difficult for our organisation and for the broader construction sector. There can and should be no mincing of words in this respect.
In this publication, I seek to look at the impact that is likely to be inflicted on the sector. I understand ours is (as yet) one small voice of many. But it is businesses like ours that the government needs to consider.
We are the small, aspirational organisations who dream about – and work towards – an exciting future. One which will help build the future in the process, through work ethic, ambition, employment of the best and brightest and contribution to shaping the future of Australia.
We all understand the public health crisis plaguing our state, country, and the world at large. But the impact on people, livelihoods and ultimately people’s mental and physical health must start being a consideration.
The construction sector has done little wrong, in my view. We’ve abided by guidelines throughout the pandemic, done our part, made our staff aware, followed guidelines. Very few cases have resulted from our work or spread because of our work. No more than any other industry, in fact.
The economic damage
The shutdown of construction in Greater Sydney to contain the coronavirus outbreak has affected more than a quarter of a million workers and deliver a $1.4 billion blow to the NSW economy.
The restriction, which came into effect in mid July, required construction sites to close until July 30, unless work was “urgently required”.
Where most work
The effect of the ban has hit hardest in outer Sydney, where the construction industry is a large employer and workers will be forced onto welfare payments.
Our industry is the largest employer in Penrith and Camden in Sydney’s west, where more than one in 10 adults work in the sector. The most affected areas are the Wollondilly and Hawkesbury local government areas (LGAs), according to an analysis by The Australian Financial Review of census data from the Australian Bureau of Statistics (ABS).
About 15% of workers in these two regions are employed in the construction industry.
Why you can’t just turn the construction sector “back on” again
The NSW government’s decision to shut down building sites in Greater Sydney caused lengthy backlogs across the construction industry, which is already stretched to its limits meeting record demand spurred by the federal government’s HomeBuilder scheme.
And the truth is that construction schedules will blow out even further due to the shutdown. It is problematic enough shutting sites down, but even worse trying to reopen them.
What essentially might have been a two-week lockdown will probably take three to four weeks to recover from. What’s more, this 10 day, two-week shut down in the industry could cause two-three months of delays, and that is something the government seems not to have factored in.
And then there is the big question: Who’s going to pay for the rework?
For example, you can’t shut down a building site in 72 hours. It would be like asking a retailer or a supermarket to close their business and leave all their stock outside.
Construction sites are live sites. We work with open trenches, open building sites. We have materials and equipment exposed to the weather.
And we can’t just “cover things up” with a tarpaulin and “lock the front gate” and expect it to be okay when we get back.
What happens next week when we come back and trenches have got to be re-dug, everyone is clamouring for materials at the same time, creating a huge demand spike, and it takes ample time to get back into the groove of construction?
What happens is that already struggling builders will have to wear the cost, and this is one of the unanticipated side effects the government seems not to have considered.
A sector already struggling to meet demand
The pause came at a busy time for the construction industry, which is struggling to meet the surge in demand brought on by the Commonwealth government’s now-expired HomeBuilder grant, which at one point was worth up to $25,000.
More than 23,000 NSW residents applied for HomeBuilder, and building approvals have surged to record levels as a result of the scheme.
The knock-on impact of all this seems not to have been considered by the government either.
A cashflow nightmare for smaller entities
Finally, the two-week shutdown across Greater Sydney construction has forced the state’s contractors, running on very tight profit margins already, into a scramble for cash to pay staff and suppliers.
Industry bodies have already warned that smaller businesses would go to the wall without financial support.
“It’ll be a cash flow crisis,” as Master Builders NSW executive director Brian Seidler rightly put it. He further said, “when did the subcontractor last get their progress claim to allow for a two-week shutdown? If you’ve got 600, 400 employees [to pay] over two weeks, you’re talking millions. Where does that come from?”
Many subcontractors are asking the same question.
The above issues highlight how the impacts of the shut down of the sector are multifarious and far-reaching. They seem not to have been anticipated by the government.
My hope once construction resumes is that common sense will prevail should there be another outbreak. Frankly, if it doesn’t, many in the sector simply won’t survive.