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Christchurch painter says building firms use tradespeople 'like banks'

Placement Painters owner Glenn Hunt outside the lockup shed he was forced to sell to a friend last October to cover debt ...

24 March 2016

Placement Painters owner Glenn Hunt outside the lockup shed he was forced to sell to a friend last October to cover debt from delayed work payments.  Christchurch's building industry bills are mounting and it's taking longer for tradespeople to be paid.  Figures from nationwide debt collector Baycorp show the amount owed to blocklayers and bricklayers rose 400 per cent from 2014 to last year.

In contrast, the amount owed to floorers' fell 75 per cent over the year and electricians' bills fell 35 per cent.  The money owed to most Christchurch building trades has increased from 2014 to 2015 according to Baycorp figures.  Placement Painters owner, Glenn Hunt, said building firms in the Christchurch rebuild were delaying payments to sub contractors to keep themselves out of financial trouble as earthquake repair work dwindled.  Subbies were being used "like banks", he said.

Hunt said painters and other tradespeople were being forced to drop their hourly rates to as little as $20 an hour or risk losing jobs.  Finding work and getting paid on time at a good rate was now "a huge problem area," Hunt said.  His Papanui company employed 20 staff two years ago but now had six. Other painters and decorators were surviving "hand to mouth" on a week-to-week basis, he said.

Hunt said his 15-year-old company had been close to folding many times since the quakes, during which time his previous painting products supplier had cancelled his trade credit account and made him pay as he went.  Last October a friend had bought his lock-up shed in Papanui so he could stay afloat.  A bank, insurer, the Inland Revenue Department and others in the building industry had also been generous, he said.  The company had paid off its own debt, had a year's worth of work ahead of it and was moving back into its old line of work; high-end home restorations. But cashflow and profit margins were still tight.  "We may still fall over, even now."

Christchurch-based Receivables Management chief executive Ross Fleming said its regular survey sample of invoices supplied by 100 trade creditors showed 45 per cent had outstanding bills after their 20th of the month due date.  This was well up on the 31 per cent unpaid three years ago.  Fleming said its creditors were often waiting two months to be paid after invoicing.  Building Industry Federation chief executive, Bruce Kohn, said Baycorp's analysis may well reflect a change with the Canterbury rebuild situation moving off a peak, especially in residential contracting.  Specialist trades were high demand in the region and contractors "as a matter of policy tend to place an emphasis on early payment of those they regard as a precious resource when there is strong demand".

Builders in the residential sector had been advised to take care in management of their businesses "as the environment moves from at least a semi-boom to more normal historical  levels of activity," said Kohn.

"Hopefully this will subsequently be seen as something of a 'rogue' situation and a more regular pattern, similar to that in past analyses, will show through."

Henry Construction co-owner, Emma Henry, said the payment squeeze was partly because there was less work around.  Her company had a stable staff on wages but employed fewer people than a year ago, when it also had contract builders.  A lot more tradespeople were ringing or emailing wanting work in the past six to 12 months, Henry said.  Painters were particularly short of work, after having plenty of it during Fletcher EQR's home repair programme.

"What we are seeing is a lot of builders looking for work and we haven't seen that for a long time."

www.stuff.co.nz 24 March 2016