COVID-19 has had a massive impact on every industry as states locked downed their economies and the economy has fallen into a depression. The question on everyone’s mind that there is no answer to is, what will happen when the economy opens back up?
Economists say that it could up to ten years for the economy to recover from pre-COVID-19 levels. It could take a few years just to get things back to a sense of normalcy. For the construction industry, it may mean things are going to get tight for a while as states struggle with lower tax revenues and businesses struggle just to stay afloat.
Today, we want to share some of the long-term impacts on construction companies, key questions you should be asking, and a few practical steps moving forward.
Potential Long-Term Impacts
Long-term, construction companies will have to contend with decreased demand as governments face rising deficits. Additionally, both residential and commercial projects will be slowed as unemployment remains high and GDP growth is minimal. This means:
- Construction with high debt and low cash reserves may face a liquidity crisis.
- Smaller businesses and sub-contractors may fail.
- Customers may seek to terminate or renegotiate contracts.
- Subcontractors – be prepared for more work as general contractors and bigger companies look to cut their costs.
Questions You Should Be Asking
- How can you minimize risk and liability? (This is an area we can help you with)
- How can you keep your employees and fellow construction contractors safe?
- What technologies exist that can help you gain operational leverage and increased efficiencies.
Practical Next Steps
There are four next steps you can begin thinking through right now:
- Prepare for increased liquidations and renegotiations of contracts.
- Work on restructuring your business so you can weather the storm.
- Adjust your strategy and study the changes to the marketplace closely.
- Consider if the crisis is a catalyst to rethink how you do work and can you accelerate the adoption of technology.