Trades and ConstructionBusiness Advisory

The risk and opportunity for trades businesses post-COVID

Shaun McNamara
4 July 2022
4 min read

4 July 2022

The construction industry finds itself at a crucial juncture. Recent events give rise to caution, with some high-profile recent construction company failures reported across the sector. Momentum in the residential property sector has cooled with both the volume of transactions and value of property sales coming to a halt following two years of all-time highs being reached. The previously buoyant private property spend has cooled with household budgets under pressure through inflationary cost increases across the board.

As travel restrictions are lifted and borders open further, there is both risk and opportunity for trades businesses. Those who have positioned themselves to onboard and integrate international labour may benefit from those seeking out the relative attractiveness of NZ as a destination to live. Whilst those who have transferrable skills may seek higher wages in other economies starting with Australia.

Fuelling the optimistic side is the ongoing momentum in the Government and Infrastructure spend across many national and local projects. From an Otago perspective this is led by the Hospital, University, Education and the local Government sectors.

The impact of COVID-19 on trades businesses

While each business has its own unique story and experiences from navigating COVID-19 and its downstream effects, we’ve observed at least four distinct phases that most trades businesses moved through.

1.The honeymoon period

Following the original lockdown in April/May 2020 most tradies experienced pent-up demand, and strong pipelines from pre-COVID projects. With the supply chain still intact and worker engagement strong, this meant a period of strong performance for most.

2.Reality setting in

Around late 2020/early 2021, the reality of ‘post-COVID operating conditions really set in. The first signs of supply chain constraints, cost inflation and worker shortage became evident. Life as a tradie became more difficult.

3.Momentum killer

These challenges were cemented by the August 2021 lockdown, which really killed off momentum. Supply chains ground to a halt, shipping challenges became worse and, locally, employee fatigue and wellbeing became key issues. Most trades businesses limped their way to a well-earned break for Christmas 2021.

4.The hangover

As everyone got back to business for the new 2022 year, there was a cautious optimism around with most people coming back to work following an outstanding Aotearoa summer period. Enter Omicron.

Omicron brought a completely new set of challenges for business with owners faced with the realities of working with the virus within our communities. Up to 25% employee absenteeism has been commonly reported, with significant and prolonged disruptions to supply chains now the norm. As one tradie described to me, “It’s the hangover that won’t go away”.

Critical success factors for tradies post-COVID

Whilst the future is as uncertain as ever, what is emerging is a clearer picture of trades businesses that are best placed to prosper, and those that are likely to struggle. Here are the critical success factors we see moving forward for trades businesses.

Attracting and retaining key staff

Research shows that values, culture, and alignment of purpose are the key to the long-term success of attracting and retaining staff. Pay-rates need to be competitive with market rates but are not a long-term strategy for success in this area.

Staff wellbeing

The mental and physical health of employees will continue to be a major factor in successful performance. Those that are able to provide management advice and support to staff will be more likely to prosper.

Passing on cost increases

The inability to pass on cost increases has been the number one factor mentioned in recent construction company liquidations and failures. Those that manage contractual obligations carefully and transparently will ensure profitability is maintained.

Management and delivery of projects

The current supply chain challenges are placing significant value on long-term relationships and partnerships. Those who have established and trusted reciprocal values are prospering currently and will continue to do so.

Access to sectors likely to grow

Several tradies have found themselves exposed due to specific sectors experiencing constraints. Those that can pivot towards sectors where growth is still likely will be most successful: particularly accessing the Government, Infrastructure and Education sectors.

Get help supercharging your trades business

We’re hosting an evening for trade business owners on Wednesday 6 July to hear from our experts on the learnings they’ve developed from working with hundreds of trades business owners.

Click here to register and come along

Author: Shaun McNamara | Partner

Shaun is a key Partner in our Accounting and Business Advisory team based in Dunedin, with clients spread across the wider Otago region. Born and raised in the Otago region, Shaun takes great pride in working with the local business owners to assist them in achieving their goals. Shaun prides himself on 'partnering' with his clients and offers practical, commercial focused advice delivered in a concise manner. Shaun has a wide range of clients operating in a number of industries. He has also developed some particularly strong relationships in the trades and sub-trades area including construction, engineering, plumbing, electrical and has a strong understanding of the drivers of success in these areas.