Stage 4 restrictions impact on property and construction sector

By Andrew Clugston - August 12, 2020

With Victorian Premier Daniel Andrews’ recent announcement of Stage 4 lockdown for Metropolitan Melbourne, a raft of restrictions have been put in place for businesses.

For the property and construction industry, complying with these restrictions has required adjustments across large and small-scale construction sites, effective Saturday 8 August.

The rules and restrictions are continually evolving as governments grapple with containing the health crisis. It is important businesses stay apprised of updates and regularly consult government websites, resources and their businesses advisers for the latest information.

Business Victoria’s construction sector guidance provides further information.

Strengthening your business’s financial position to withstand Stage 4 restrictions

The restrictions will understandably have an impact on your business’s financial performance, whether that’s due to delays on current projects, the financial and legal implications of missing project milestones, the need to stand down staff, difficulty meeting finance covenants, the financial stability of key contractors or the impact of current delays on your future projects. While it can be difficult to think about exactly how your business will navigate further uncertainty, there are measures your business can take to strengthen your financial stability. These measures are outlined below.

Have a long-term view of trading conditions

Approach the Stage 4 restrictions with the assumption that trading conditions won’t simply return to normal after this 6-week lockdown. The impacts of these restrictions will impact the industry for several months, so it’s prudent to plan around potential impacts in the medium to longer term.

Review your contractual performance obligations

Take time to understand how your reduced workforce capacity and other restrictions will impact your business’s ability to meet its performance obligations agreed in your contracts. If your business is unable to meet its obligations, seek legal advice about the options you have to negotiate or revise your obligations.

Assess the impact of restrictions on your business’s financial stability

If the restrictions will result in significant delays to your projects, and a significant reduction in your income over the coming weeks, assess how this will impact your business’s financial stability. Depending on your upcoming financial obligations and your current financial position, you may need to speak with your bank and other financiers to negotiate upcoming payments.

Prepare a short term cashflow forecast

Once you have an indication of the impacts of the current restrictions and the flow-on effects to your business’s finances, prepare a short-term three-way cash flow forecast. This analysis will indicate where your business stands financially and whether accessing financial support is suitable in your circumstances.

Importantly, while cheap debt and financial support is available, it’s not necessarily the only option. Take a strategic long-term approach with changes to your existing finance facilities and the impacts of accessing the financial support available.   

Options to explore to keep your business’s finances stable during this time may include:

  • assessing your eligibility for JobKeeper and applying if it’s suitable for your circumstances;
  • talking to your bank about additional facilities or loan deferrals;
  • requesting extended payment terms with creditors;
  • negotiating payment plans with the ATO;
  • seeking to reduce costs where possible through measures such as rent relief; and
  • seeking professional advice.

It’s critical to start this planning early. The sooner you start this assessment, the more options you will have available to you. Don’t wait until issues arise before seeking solutions.

Access resources for further information and support

Access further information about the restrictions and the financial support available through the Federal and Victorian Governments. These resources include:

Understand and plan for the financial impacts now

While it is unclear how the property and construction industry and the broader economy will look following Melbourne’s Stage 4 lockdown, you can still put measures in place now to ensure your business strengthens its financial position.

Contact a Pitcher Partners specialist to discuss how the Stage 4 restrictions may impact your business’s financial performance and put a plan in place now.

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