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Impact

The Impact of COVID-19 on the Construction Industry

and the Road to Recovery

June 20, 2023

The year 2020 will long be remembered as the year that brought the world to a standstill. COVID-19, a virus hardly anyone knew about at the start of the year, drastically changed our lives in just a few months. Every industry was affected, including the construction sector. In this article, we will explore the impact of the pandemic on the construction industry and discuss potential avenues for recovery, including an examination of the Employee Retention Credit (ERC).

COVID-19: An Unprecedented Challenge

From the moment the first lockdowns were implemented, construction projects across the world were severely impacted. Workers were confined to their homes, supply chains were disrupted, and countless projects were indefinitely postponed. The industry, typically characterized by its hustle and bustle, was left in an unsettling stillness.

A survey conducted by the Associated General Contractors of America (AGC) in June 2020 revealed that 68% of contractors had experienced at least one project cancellation due to the pandemic. Additionally, 48% of contractors saw ongoing projects halted, a testament to the sudden and severe impact of the virus on the industry.

Lingering Effects and a Slow Recovery

As the initial shock of the pandemic has worn off, the industry has been left grappling with a range of lingering challenges. Skilled workers, many of whom were either laid off or chose to leave the industry during the pandemic, have been slow to return. Supply chain issues continue to cause material shortages and price increases, creating financial strain and project delays.

Moreover, the construction industry must confront the reality that some pandemic-induced changes, such as increased remote working and a greater emphasis on health and safety protocols, are likely here to stay.

The Role of Technology

impact of covid on construction industry

One significant outcome of the pandemic has been the accelerated adoption of technology in the construction sector. Digital tools, such as Building Information Modeling (BIM) software, have become essential for managing projects amidst the restrictions. Meanwhile, the use of drones and other remote surveying tools have increased to allow for work to continue while maintaining social distancing measures.

These technological advancements offer opportunities for increased efficiency and cost-saving in the long term, serving as a silver lining in this challenging period.

A Potential Lifeline: The Employee Retention Credit

In these trying times, potential financial relief has emerged in the form of the ERC. A provision of the CARES Act, the ERC is a refundable tax credit designed to encourage businesses to keep their employees on the payroll during the pandemic. Importantly, this credit isn't limited to certain industries – construction businesses are eligible, too.

For businesses that have suffered a significant decline in gross receipts or those that were forced to partially or fully suspend operations due to government orders, the ERC can provide a welcome financial boost.

Maximizing ERC Benefits

Understanding the eligibility requirements and calculation methods of the ERC is crucial for construction businesses looking to utilize this credit. Eligibility factors include the number of employees, the degree of business disruption, and the amount of wages paid during the pandemic.

Properly calculating the credit can be tricky, with variables such as qualified wages, health plan expenses, and the number of full-time employees coming into play. Owing to this complexity, many businesses are turning to ERC advisors to ensure they are maximizing their potential credit.

Looking Forward: Resilience and Recovery

While the construction industry has undeniably been hit hard by the pandemic, there are reasons for optimism. The industry has a long history of resilience and adaptability, characteristics that will be essential in the journey towards recovery.

While the ERC can provide some financial relief, real recovery will require a holistic approach that includes reevaluating business models, investing in new technologies, and upskilling the workforce to meet the changing demands of the industry.

In conclusion, the construction industry's challenges during the COVID-19 pandemic have been numerous and far-reaching, but they have also ushered in opportunities for innovation, resilience, and transformation. With the potential financial lifeline offered by the ERC and the accelerated adoption of technology, the industry is poised to weather the storm and emerge stronger than before.

About The Author

Seth Bloom is a New Orleans-based legal technology entrepreneur, attorney, investor, and Employee Retention Credit consultant. He serves as a Board member for several organizations focused on education development, youth empowerment, politics, and the arts. Seth is the owner and founder of Sunshine Strategies, LLC.

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