STRESS AHEAD FOR COMMERCIAL CONSTRUCTION

By NZHJ January 20, 2021 Industry news

CreditWorks data for the October-December quarter indicates further stress ahead for the Commercial Construction sector’s cashflow.

Our exclusive regular data from CreditWorks Data Solutions (www.creditworks.co.nz) assesses the level of credit risk posed by a particular industry sector.

What can we derive from the data for the October-December 2020 quarter?

Although the December figures are generally unchanged on previous months, as per previous years, Commercial Construction is the exception.

CreditWorks’ GM, Alan Johnston, comments: “As previously identified, most fallout from the Christmas-New Year spend and reduced activity becomes evident in the Feb/March figures.

“However, while there was little change to the risk profiles in Core Retailing and Residential Construction – and in fact, a slight improvement in Hardware, Building & Garden Supplies Retailing – we saw further deterioration in Commercial Construction” (see graphs below).

Indeed, the latest Commercial Construction stats show a 27% increase on November in the 10-20% risk band, +43% on October’s data.

 “This is somewhat concerning,” says Alan Johnston, continuing: “If this continues to extend into the higher risk bands – which is a logical expectation – we are going to see further stress on the Commercial Construction sector’s cashflow.”

Forewarned is forearmed: “Suppliers need to start taking note of any payment issues in this sector in particular and act accordingly,” warns Alan.

See below for the October-December quarter's data for the four sectors being tracked.

The left axis indicates the % of a sector that is at risk. The bottom axis shows the % likelihood of failure over the next 18 months.

 

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