Construction sector takes $10b hit as demand plunges

Revision in projected demand largely due to drop in private-sector contracts, says BCA

The downward revision is due to a drop in private sector construction demand. ST PHOTO: MARK CHEONG

The construction sector is poised to take a $10 billion hit this year, with demand dropping and projects getting pushed back in the wake of the Covid-19 pandemic.

The two-month-long circuit breaker that brought construction work to a halt, coupled with some 180,000 foreign construction workers who were put on stay-home notice, has left its imprint on the industry.

As a result, the projected construction demand for this year has been revised to between $18 billion and $23 billion following a mid-year review, the Building and Construction Authority (BCA) said yesterday. This is sharply down from BCA's January forecast of $28 billion to $33 billion for the year.

The revision is largely due to a drop in private-sector contracts, which are expected to total $7 billion to $9 billion this year. Last year, they were worth $14.5 billion.

Some public-sector projects have also been postponed from this year to next year as contractors and suppliers have asked for more time to assess the impact of Covid-19 on resource management and project implementation timelines, said BCA.

This year's forecast for public-sector contracts is $11 billion to $14 billion - down from $19 billion last year. Construction on projects such as Changi Airport's Terminal 5 has been halted.

The construction sector has been one of the hardest-hit industries amid the fallout from the pandemic, contracting 97.1 per cent from the first to the second quarter.

It also saw one of the largest declines in employment - by 13,600 workers, second to only the food and beverage services sector.

Yesterday, BCA said construction demand is expected to recover to some extent from next year.

Public residential developments and upgrading works, developments in the Jurong Lake District, construction of new healthcare facilities and various infrastructure projects such as the construction of the Cross Island MRT line will support demand.

BCA noted it is important that the construction industry remains vigilant to prevent a resurgence of Covid-19 cases, which could bring the sector to a halt again.

Minister for National Development Desmond Lee said in a Facebook post yesterday that the construction industry has realised the need to build up capability for sustainable business development.

He noted that a new planning and coordination regime for business continuity, and the role of technology and digitalisation to build up industry resilience in the long run, were some issues raised by participants at a leadership webinar co-organised by BCA and the Construction Industry Joint Committee on Wednesday.

"In spite of the restart, the industry still faces challenges," Mr Lee said. "The silver lining is that we expect demand to pick up to some extent next year, and there will be a pipeline of public-sector projects coming on stream next year."

Straits Construction executive director Kenneth Loo said the $10 billion downward revision was not unexpected.

"There was no work for around four months during the circuit breaker period and before the dorms were cleared, so the one-third drop is quite reflective of these months," he added.

Teambuild Engineering and Construction executive director Johnny Lim feels construction will pick up as demand picks up. Home sales were robust last month and developers may look for land more aggressively, he said, adding: "It is a chicken-and-egg thing."

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A version of this article appeared in the print edition of The Straits Times on September 18, 2020, with the headline Construction sector takes $10b hit as demand plunges. Subscribe