Magazine article New Zealand Management

Enterprise Success: Building a Future; It's Already Helping Drive the Christchurch Recovery -- but Can New Zealand's Construction/engineering Sector Shuck off Its Historic Volatility to Provide the Building Blocks for Wider Economic Growth? Vicki Jayne Tries to Nail the Vital Role of Leadership in This Sector

Magazine article New Zealand Management

Enterprise Success: Building a Future; It's Already Helping Drive the Christchurch Recovery -- but Can New Zealand's Construction/engineering Sector Shuck off Its Historic Volatility to Provide the Building Blocks for Wider Economic Growth? Vicki Jayne Tries to Nail the Vital Role of Leadership in This Sector

Article excerpt

Byline: Vicki Jayne

Stories of NZ enterprise success

This is the fourth article in a major eight-part NZ Management series: Stories of NZ enterprise success. Leading New Zealand business journalists Vicki Jayne and Nick Grant conduct a sector-by-sector review of the underlying drivers of success in key parts of New Zealand's economy. Next month: the finance sector.

Potential is a word that hangs over the construction sector like a loaded crane boom. Leaky homes, the Christchurch rebuild and the urgent need to stretch Auckland's housing all point to significant growth ahead. But will a bust follow?

Volatility plagues an industry that has been badly exposed to the GFC fallout -- both in terms of confidence and available capital. And, as a PricewaterhouseCoopers report prepared last year for the Construction Strategy Group points out, the sector "suffers boom-bust cycles far stronger than those experienced by other sectors usually associated with fluctuating fortunes".

The same report also highlights the potential for construction to significantly lift domestic economic performance -- and "lead the country out of its current unemployment malaise". That's because this sector of New Zealand's economy has historically been a great job creator -- accounting for one in 12 New Zealand jobs and -- in the past decade -- contributing one in seven new jobs.

There are already positive signs this is starting to happen. Christchurch recruitment firms recently reported such high demand for construction-related skills that some interviewees were being snapped up within 48 hours. Job openings in Canterbury are rising faster than anywhere else in the country and the National Bank's regional trends survey revealed the region is now New Zealand's fastest-growing.

And all that well before the earthquake rebuild gets seriously underway -- probably sometime in 2013.

It's a lift in fortunes that the industry is eagerly anticipating after global financial woes last year pushed domestic residential housing approvals to their lowest levels in 46 years and saw capital expenditure slow worldwide as confidence ebbed.

Caution still rules, according to Beca Group's recently appointed CEO Greg Lowe.

"Our business is spread across New Zealand, Australia and Southeast Asia and in all those markets we've seen a slowdown in capital expenditure."

The growing uncertainty around European financial difficulties isn't helping and while governments in Australia and New Zealand have continued infrastructure investment, they are now less able to commit further capital, he notes.

Government spending has certainly helped keep the local industry afloat, according to Graham Darlow, CEO of Fletcher Building's construction division.

"Government has done a good job keeping the work flowing. So expenditure on infrastructure in areas like roading, health and education has been an absolute saviour. If the Government hadn't continued to spend, this industry would be on its knees."

Darlow says industry volatility makes it difficult to hang on to skilled personnel. However, the situation is better than in the early 1990s when the industry hit bottom a few years after the 1987 sharemarket crash -- and stayed there.

"There was almost no activity at all for probably five to six years after that and the industry lost a lot of talent and capability then. So from the late '90s to 2010, we have done a lot of capability building and made big investments in plant, equipment and training... The danger is that we are now losing those skills across the Tasman."

Residential construction has become a tough environment in which to work. Builders heading to Australia are not just going for the money. Some are escaping what they see as unfair fallout from the leaky homes debacle. With central and local authorities sidestepping responsibility for inadequate building standards, frustrated homeowners have instead targeted builders. …

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