Industry

18 MAY 2020

COVID-19 CRISIS MUST BE AN ACCELERATOR FOR POSITIVE CHANGE, SAYS NEW ARCADIS REPORT

The challenges industry is facing in the face of Covid-19 could force the sector to finally address some of its biggest weak points, so that the pain being felt now translates into lasting improvement. This is the main sentiment of a new Arcadis report outlining the views of 17 major contractors.

The report - Come together, right now: addressing short term challenges for a long-term change - outlines what contractors believe are the most challenging risks in the wake of the crisis: cash, impact on revenue forecasts and consequential reduction in profitability.

As we are slowly preparing for at least partial exit from the lockdown, the report claims that subcontractor sentiment is positive in terms of a return to work. All respondents said their subcontractor workforce is keen to mobilise. A lack of ability to deliver creates a perfect storm for contractors. They accept that a sustainable supply chain will underpin their future success.

A clear message from contractors was that while cashflow is king, safety is more superior. All the companies surveyed said that colleague safety was their key priority. 

The report claims this quest to create safe working conditions puts the construction sector ahead of the game – other branches of the economy still need to face the challenges related to establishing new working practices. But it also comes at a cost and the resolution of who pays what at client, contractor and sub-contractor level will be critical to unlocking the coming recovery and ensure that sufficient contractor pool exists to maintain the competitiveness.

Some contractors indicated that although productivity has dropped at a project level, in relation to the number of trades on-site productivity was up overall. 

Digital technologies have been on the agenda for a while, but the current disruption is moving them to the top, with contractors and wider project teams seeing first-hand the benefits in efficiency, coordination, and their ability to work remotely.

Most contractors said they were not experiencing major supply shortages, which was partially because of the depressed workload and stockpiling that took place in preparation for Brexit. However, some issues were beginning to emerge regarding the availability of plasterboard, pre-mix mortar, structural steelwork. 

In the long-term, says the report, the sector depends on the full recovery of the material supply chain. More than 70% of contractors surveyed are passing early payments down the supply chain to keep cash flowing, albeit they are not able to pay subcontractors in advance of work being undertaken.

Edel Christie, UK managing director for buildings at Arcadis, said: “The construction sector is particularly vulnerable to the type of shock that we are going through with Covid-19 – it is very dependent on cash flow, it is complex by nature and is no stranger to litigation.

“Covid-19 is a wakeup call. Our sector needs to mobilise now, collaborate, so that it is ready to play its role – in supporting the economic recovery now, and next - in tackling the major horizon risk of climate change. Let us not waste this crisis.”

Click here to download the full report Come together, right now: addressing short term challenges for a long-term change.

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