Industry Trends - August 2021

We take a look at a number of industry metrics, and drill into what this means for your scaffolding & edge protection business.
Residential New Builds

As you will have been experiencing, the residential new build sector has been on a tear. Building consents are the highest now since the 1970s (in absolute terms - per capita we still built more houses then than now). In the last quarter, over 8,000 residential consents were issued, up from 6,000 in the same quarter 5 years ago. While growth at this rate is unlikely to continue, especially as land supply constraints start to bite, there is good demand for scaffolding in the residential new build market.

Source: Statistics NZ
Residential Renovations

There are now over 1.85 million private dwellings in New Zealand. This represents a large installed base of residential buildings that require regular maintenance, for example, re-roofing, re-painting and renovations/extensions. This is a significant market opportunity for scaffolding and edge protection companies: between 37,000 to 74,000 jobs a year (assuming each building requires scaffolding or edge protection once every 25 to 50 years). The message here is – don’t ignore the maintenance / renovation market in your business.

Commercial Edge Protection

While the commercial edge protection market isn’t growing as fast as the residential market, it is certainly holding steady. Total new non-residential building consents are around 1,300 per quarter, and a net 11% of businesses recently reported they plan investing more in new buildings.  

Labour

If you have been finding it harder to recruit staff in recent months, you haven’t been alone. The NZIER Quarterly Survey of Business Opinion is a survey of non-farm businesses around the country that has been running since the 1960s. The latest survey was published on 6 July 2021 and found that:

·     A record net 70% of businesses say they are finding it hard to get skilled staff.

·     A net 57% of businesses are finding unskilled people difficult to source.

·     A net 24% of businesses say they plan hiring more people, up from 20% in the March quarter, a ten-year average of 9%, and the best reading since the September quarter of 1973.

Source: New Zealand Institute of Economic Research

You can add to this that the country’s unemployment rate fell to a far lower than expected 4% in the June quarter. There is no slack in the labour market and pressure on wages will grow.

All of this means that creating a positive work environment for your staff is more important than ever. This isn’t just about putting on a staff BBQ on a cold winter morning, although that definitely helps. It is also about giving training and support so that people who have the right attitude and desire to develop have a pathway in your business to do so. It is also about adjusting wages where required, especially for productive staff members.

Pricing

Here is another result from the NZIER Quarterly Survey that you should be aware of: a net 53% of businesses in the survey plan on raising their selling prices over the next three months. This is well up from 27% in the March quarter, and the ten-year average of 18%. In fact, it is the highest reading since 1986, which is 35 years ago. A survey last week from ANZ also found that a net 61% of businesses plan on raising their selling prices.

So you should be thinking about your pricing structures as well. If you are able to raise prices, you will be able to afford increases in your other expenses – such as wages – while maintaining profit margins. And the easiest time to raise your prices is when everyone else is. As the survey results suggest, your competitors are likely considering price increases, and you probably should too.

Source: New Zealand Institute of Economic Research

Gary Tavey joined the INTAKS team in July 2021, into the newly created role of Training & Support Manager.

By 
Peter Chapman

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