German Industry Optimistic in Face of COVID as Border Restrictions Are Set to Loosen
The German construction sector is operating at about 80% going into July and August and seems to be emerging as one of the bright spots in a country that has been hit hard by the coronavirus pandemic. While projects are still at risk from supplier slowdowns and other issues, an informal industry survey shows most company activities are proceeding normally, with precautions on-site.
New project bids are being awarded, but industry watchers at HDB, the German construction industry association, report that there is still risk in the medium- to long-term for increasing drops in demand and potential project cancellations.
As lockdowns went into effect in mid-March across Europe, national borders in the European Union slammed shut and are only now just starting to reopen. The United Kingdom has imposed a two-week quarantine-in-place on both residents and visitors entering the country from abroad. Earlier restrictions in the EU had barred all but essential border crossings, meaning that workers who had been commuting across borders to go to their jobs were stuck—resulting in some stress on German jobsites.
Even so, members surveyed by the HDB say immediate effects are being absorbed, with 59% of companies in the German construction industry responding that coronavirus is hampering performance, but its effects are minor.
One-third of those surveyed expect total sales will decrease by more than 5% in 2020 compared with 2019. Despite depressed sales expectations, the majority of respondents plan to leave their workforce unchanged in 2020: only 13% foresee a workforce reduction, while 14% plan to hire more employees.
Esther Döringer, a spokeswoman for Bilfinger, an industrial-services provider based in Mannheim, Germany, says the field shows great variation. “Entities with a large percentage of work for the steel or oil-and-gas industry have seen a decrease in revenues,” she says. “Others with a majority of work for other industries like pharma, biopharma or chemicals, are seeing rather stable revenues.”
Bilfinger’s North Sea oil-and-gas business, based mostly in the UK and Norway, has seen a decline in revenues due to COVID-19 and the resulting deterioration in oil prices. Even so, a pipe rack project for BP subsidiary Ruhr Oel in Gelsenkirchen is moving ahead; Döringer says some projects in Germany have been postponed, but many others are back on track after getting through COVID-19-related delays.
Bilfinger also is going to be a large part of the Hinkley Point nuclear power project in Somerset, UK: the firm’s $448-million contract calls for execution design, supplier management, procurement, pipework fabrication and construction works for the Hinkley plant’s big steam-supply system and balance of the nuclear island.
Hochtief, another large German engineering concern—and Germany’s largest construction company—sees a pipeline of projects going forward worth $678 billion. The company is going to be leading large infrastructure projects such as the new Rhine River bridge at Duisburg-Neuenkamp, an 802m cable-stayed bridge—Germany’s longest—and as part of a joint venture, will deliver tunneling expertise to modernize the power grid under London. It’s also pressing ahead with rail and airport work in Prague, capital of the Czech Republic.
Other large projects around Germany show signs of production amidst the pandemic, such as the tall cranes over the large Herzog & de Meuron-designed luxury flats at Tacheles in Berlin, and the groundwork for Tesla’s planned gigafactory, continuing construction outside the capital.
The HDB survey respondents note that April sales figures won’t be available until the end of June.