The recovery of Australia’s construction and infrastructure sector from the impacts of COVID-19 is expected to extend over the remainder of the year, with non-infrastructure workloads, headcounts and profit margins all predicted to decline sharply. What support is needed to create an environment that gives investors greater certainty over timelines and delivery of projects, and make procurement processes more efficient? The recently released RICS Q1 2020 Australia Construction and Infrastructure Survey found that despite governments not mandating construction work stoppages, the robust expansion in activity levels recorded over the course of 2019 have contracted significantly in the first quarter of 2020.
The results from RICS’ quarterly guide to the trends in the construction and infrastructure market also paints a clear picture of the support required to help Australia’s Chartered Surveyor and construction professions navigate their way out of the pandemic. As workplace and social distancing restrictions continue to ease, long-term support will be critical to keep the financial position of many companies healthy and limit the negative impact on profit margins that many professionals have forecast through this survey.
The performance of the sector over 2020 has now been entirely dominated by the impact of COVID-19. Firms have been placed under increasing financial stress as social measures to tackle the virus became stricter and the seismic shock to the global economy has become starker.
Funding the delivery of infrastructure has been high on the global political agenda, and Australia is no exception; It will be even more so when governments take action to bolster economic recovery from COVID-19 or improve social infrastructure. However, a lack of investible projects has already meant that billions of dollars of potential funding has been sitting idle.
Analysis of global Preqin data shows there is currently over $220 billion of dry power within unlisted infrastructure funds worldwide – capital that has yet to be committed to a project, with a further $203 billion being raised. Assuming a typical 40:60 equity-debt structure, combined with leverage, this would support the acquisition or development of more than $1 trillion of infrastructure. Based on current execution rates it could take 7-8 years for all this capital to be invested, before we account for the additional impact of COVID-19.
Infrastructure investment will inevitably occupy a pivotal role in a global post-pandemic economic recovery. However, governments’ spending during the crisis will take its toll on their long-term capital budgets. Unlocking private capital is therefore even more important now than it was before the onset of the virus.
The COVID-19 response has reaffirmed the capacity of the public and private sectors to work harmoniously and effectively. Perhaps most prudently, however, the pandemic has emphasised the need for Australia’s policy makers to make clear, decisive and impactful decisions and to enlist and enable the support of the private sector.
An effective response also rests on the ability of the construction workforce to have the knowledge and capability to adjust to new ways of working that will inevitably come once the pandemic passes.
To ensure professionals from right across the construction and infrastructure sector are equipped to tackle the challenges of the post-COVID recovery, RICS is offering a range of tailored, live and interactive online training courses. Delay and Disruption, AS4000 Construction Contracts, Managing Change: Variations, Negotiation Skills in Construction and NEC4 ECC Introduction are amongst the industry-leading courses RICS is delivering over the coming months that will ensure those working in the construction and infrastructure sector stay at the leading edge.
This partner content was brought to you by RICS. To find out how this training can benefit you, please visit www.rics.org/oceania/training-events.