David Kelly, general manager for EMEA at Deputy, takes a deeper look into the challenges faced by the construction sector following the coronavirus outbreak, and the possible solutions to deal with them
Construction sites across the globe are slowly reopening after the forced lockdown due to the Covid-19 pandemic.
Yet, day after day, it is becoming more apparent that getting back to business as usual in the construction and engineering industry will not happen overnight.
Projects are being cancelled or delayed, the supply chain looks unreliable, managing your workforce is increasingly more challenging and to top it off, financial reserves are being stretched to their limit.
Covid-19 impacts on the sector
Following the Covid-19 pandemic, growth in the construction and engineering sector has been revised down to only 0.5%, falling from an initial prediction of 3.1%.
- March 2020 showed a massive drop in the construction business in France (-40.2%) and Italy (-36.2%).
- In Europe (EU-27), the construction business has decreased by 12% in March 2020
- March 2020 also shows the highest monthly drop in construction of buildings (-11.8%) and civil engineering (-13.7%) ever recorded in Europe, when compared to the previous month.
4 major issues in the construction industry and how to tackle them
Delays in project completion
The unprecedented speed at which the coronavirus pandemic spread across the world has significantly slowed down the construction and engineering industry.
According to the latest forecasts by Turner & Townsend, in the UK alone, construction sites are seeing a drop in productivity of around 35%. This research also highlighted that project completion could be delayed by up to 32 weeks following the current trend, and add up to £600,000 in preliminary costs.
Construction business owners must do their best to assess and identify the projects that will suffer from delays. Stakeholders must be informed of all the findings to avoid any unexpected surprises and reduce the risks of being sued for non-delivery.
Consider rescheduling or extending work activities to handle high-priority projects first. Also, ensure all working standards are in accordance with governmental mandates and regulations.
Unreliable supply chain
The recent economic shockwaves faced from the Covid-19 has exposed the vulnerability of the global supply chains. You may face serious delays if your construction business primarily relies on overseas suppliers. It is essential you realise that not all manufacturers, vendors and suppliers may have survived the profound economic impact of the pandemic or may not be able to fulfil their contracts at the moment.
You must assess how severely your supply chain has been affected following the pandemic. Proactiveness is key; reach out to all your vendors and suppliers as soon as possible to get a concrete idea of the severity of the situation.
Compile all the data you gathered and consider their legal and financial implications. Based on your findings, you may decide to offer contractual flexibility or move to other suppliers that are better equipped to cater to your demand.
Workforce management challenges
In the current situation, managing your workforce is yet another challenge. Worker safety and engagement should be a top priority following the coronavirus crisis. Respecting the Site Operating Procedures (SOP) and the Government workplace safety guidance can quickly become an overwhelming task. Certain projects may require you to manage a workforce of hundreds of workers at a time, multiple sites simultaneously, which will most likely include a number of different shifts.
Beyond providing the necessary protective equipment for your workers, leverage technology to ease your workforce management. Making use of a scheduling software can greatly simplify your operations and allow you to dispatch workers to different sites, depending on their skills and availability.
This will help you get a real-time overview of attendance, last-minute changes and keep up with multiple shifts and locations. Additionally, using a scheduling app will also enable you to verify timesheets and process payroll in a faster and more accurate way.
Stress on your financial position
Many construction and engineering businesses have seen a drastic impact on their financial position due to the recent pandemic outbreak. According to the Construction Products Association, construction output in the United Kingdom is expected to fall 25.0% in 2020 in a best-case scenario. This will significantly affect the cash flow of most constructions businesses, let alone the increase in costs incurred due to delays in project completion.
It is crucial you conduct an extensive financial assessment of all projects at hand to know where you stand. With your reports at hand, consider renegotiating lending agreements and even raise new equity if possible. Also, be sure to check if your business is eligible for financial support from the Government.
Ultimately, your finance team should develop and execute a financial strategy that will help you get through the projects you have contracted while minimising financial loss.
As you work your way through the coronavirus crisis, your primary aim should be to build a resilient business model. Somehow, someday, the Covid-19 pandemic will come to an end.
Following this, the landscape of the construction industry will very likely change and demand will flourish again. Governments and investors will look towards new infrastructure projects. The competition will also evolve, with some businesses not surviving and others being acquired by larger groups.
While we can all agree that this is a challenging situation for the construction sector, emerging from this crisis will allow you to bid on future projects from a position of strength.
General manager for EMEA