SMALL BUSINESSES CONTRIBUTE MORE

Small construction businesses contributed more to construction industry operating profit in recent years than medium or large businesses, Stats NZ has revealed

The operating profit of small construction businesses (those with 1 to 19 employees) increased by $1.25bn between 2011 and 2019 to $1.97bn. In the same period, the operating profit of large businesses (100+ employees) increased by $273m to $728m.

“Before Covid-19, small businesses contributed 37% ofthe construction industry’s operating profit and accounted for around 40% of all construction businesses,” annual enterprise survey manager Melissa McKenzie said. Data post-Covid has not yet been released.

“In comparison, large businesses contributed 14% of the industry’s operating profit and accounted for less than 1% of construction businesses.”

The remaining portion is represented by medium-sized business and those that Stats NZ refers to as ‘zero employees’, which includes those with working owners and companies with contracted labour.

“Construction businesses experienced rising operating profits as earthquake rebuild activities in Canterbury and new work in Auckland boosted construction activity over the last decade,” McKenzie said.

The number of small construction businesses has also grown, along with activity and profits, to over 26,000 businesses that employed around 90,000 people in 2019. In contrast, there were over 100 construction businesses with more than 100 employees that employed around 40,000 people in 2019.

Graham Burke, President of the Specialist Trade Contractors Federation, was pleased to see small business showing profit.

“New Zealand lives on small businesses. As this data shows, they account for a big proportion of construction in New Zealand – more so than overseas. Historically, the construction industry has operated on very small margins, which is highlighted by the business collapses we have seen in recent years.

“It’s also worth noting that small construction businesses are good corporate citizens – they employ and train many of the apprentices, who will be the next generation of this industry. I would hope they are making a profit on their investment of time and the risks they face,” said Burke.

Burke also noted that the cashflow for small construction businesses, while always critical, will be especially so in the recovery from the impacts of Covid-19 and lockdown.

“Small businesses in the construction sector are known for operating on tight cash-flow, so an interruption like Covid could have been disastrous for many – the financial support package has been crucial for these businesses. Nevertheless, there will still be challenges as the work picks up. This might seem ironic, but when the jobs are coming in again, and business costs such as wages and fuel go up, but there is little if any income coming from the previous month – that’s when businesses will need to have their forecasts in place and the cashflow on hand to get the jobs done and the wages paid.”