Profitability and training for growth

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The construction industry is historically very adept at expanding and contracting as necessary within economic cycles. Generally, most of our firms have survived what has been a brutal five years of record low building activity surprisingly well, although I often wonder how much the industry collectively has borrowed to survive — hundred of millions of dollars perhaps?

The good news is that the New Zealand economy grew by 2.5 % in 2012, the best year since 2007. Many economists are now predicting up to 3% to 3.5% of GDP growth for 2013, and with interest rates not expected to rise this year, we can be sure that our workloads will increase.

The economy is actually looking for our industry to drive this growth, as every dollar spent on construction translates into three dollars of economic activity in New Zealand.
This all sounds very promising, but just what shape are we in to successfully fulfil this expected increase in demand? Have we got enough financial stability and, most importantly, capital, within our businesses to fund this growth? And do we have enough skilled staff to do the work?

Firms can’t grow without cash in the bank to fund asset purchases and the increase in operating expenses. After half a decade of low rates and margins, we simply have to increase the profitability of our businesses to survive through this most dangerous time in the cycle — growth after a severe and protracted downturn.

Getting cash into our businesses and keeping it there will be essential to getting through the next 18 months. To assist our members, the RMBF is reorganising itself, and over the coming months will be providing added services by way of new and improved web sites, additional staff and training specialists, and is looking to secure expertise to assist businesses develop and grow as an exciting addition to our suite of membership benefits.

Training within our industry has dropped off dramatically during the downturn. The number of workers employed in our sector has declined by 18% over the past five years after increasing by around 70% in the previous five years, peaking in December 2006.

The number of apprentices and trainees at the BCITO has dropped below 5000 for the first time in a decade — and that organisation trains more than 80% of carpentry apprentices in the country!
Increasing skilled staff numbers will be critical to satisfying client demand, and firms who embed training into their business plans will be well positioned to expand.