Current status, economic impact and first estimations for construction - BIM World ...
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
COVID -19
Current status,
economic impact
and first estimations
for construction
Munich, April 1, 2020
This publication has been prepared for general guidance only. The reader should not act according to any information provided in this publication without receiving specific professional advice. Roland Berger GmbH shall not be liable
for any damages resulting from any use of the information contained in the publication. © 2020 ROLAND BERGER GMBH. ALL RIGHTS RESERVED.
1
COVID-19 has spread to ≥180 countries so far – Global GDP in 2020
might take a hit of 5.2 ppts. based on our main scenario
1 Current status
> So far ≥ 180 countries have confirmed
2 Economic impact
> A fast recovery is not realistic anymore
3 Reactions
> As the need for rapid containment
COVID-19 cases – Italy, USA, Spain, > We focus on the second scenario, becomes evident, measures taken by
Germany and Iran experiencing the "delayed cure", and develop two sub- governments are getting more robust –
biggest outbreaks outside of China scenarios Simple mitigation efforts are being
> Newly confirmed cases in China replaced by lockdowns and full isolation
> Sub-scenarios assess the level of global
currently near zero, but many other economic disruption at durations of 4 > A massive fiscal and monetary stimulus
countries seeing a steep rise in new and 12 weeks effort is being prepared, both on national
infections, incl. the EU and the US and international levels (EU, ECB, IMF)
> The resulting indications are that global
> Researchers worldwide are working on GDP could take an aggregated hit of 5.2 > Corporates are closing down offices and
antiviral drugs and vaccinations against ppts. in 2020 based on this week's production sites and scrambling for
COVID-19. However, clinical proof and estimate financial support
approval process might take several
months > A profound recession remains possible
but with higher downside potential
This document provides an overview of the status quo of the COVID-19 (coronavirus)
outbreak and analyzes the economic impact on selected regions and industries.
It is based on research and RB expert opinions and will be regularly updated.
Source: Roland Berger 2
1 Current status
COVID-19 is spreading across the globe – Outside of Asia, Europe
has the highest number of infections with >100,000 in Italy
As of April 1, 20201)
Confirmed: Deaths: Recovered:
862,234 42,404 178,836 > So far ≥ 180 countries have confirmed
COVID-19 cases
> China as the former epicenter of the
outbreak is now seeing a rapid decline
in the number of new infections
> A dramatic increase of cases in the last
week can be seen in the US (189,633).
Also Italy (105,792) is still suffering -
the total number of deaths there
surpasses China
> Several countries have more than
40,000 cases: Spain (95,923), Germany
(71,808), France (52,837) and Iran
(44,605)
> Other European nations are increasingly
affected, including the UK (25,499) and
Switzerland (16,605)
Number of confirmed cases: >1 >10 >100 >1,000 >10,000 >50,000
1) For most recent data, please see here
Source: Johns Hopkins CSSE (1:00 PM CET, April 1, 2020), Roland Berger 3
1 Current status
New infections in China now down to double digits – Most other
countries are experiencing a steep rise in confirmed cases
As of April 1, 20201)
World 862,234 France 52,837 Development of confirmed cases
in the ten most affected countries
USA Iran
44,605 > China's aggressive measures
189,633 seem to be effective, as the
rate of new infections is
Italy UK rapidly slowing down
105,792 25,499
> Most countries are still
Spain Switzerland experiencing a steep rise in
95,923 16,605 infections; the US now has
more than 185,000 COVID-19
China Turkey cases
82,308 13,531
> Epicenter of the European
Germany Others outbreak is in Italy with
71,808 163,693 >100,000 cases
Jan 2020 Feb 2020 Mar 2020 Apr 2020 Jan 2020 Feb 2020 Mar 2020 Apr 2020 > South Korea's rate of
1) For most recent data, please see here
infections is slowing
Source: Johns Hopkins CSSE (1:00 PM CET, April 1, 2020), Roland Berger 4
1 Current status
Researchers worldwide are working to develop potential treatments
and vaccinations against COVID-19
First clinical trial of a potential COVID-19 vaccine has been launched
> Currently, no approved vaccines exist to prevent infection with Sars-CoV-2, the virus that causes COVID-19; however,
about 35 companies and academic institutions are involved in developing a vaccine against the novel coronavirus
> At least four of the research projects have vaccine candidates being tested on animals; two clinical trials have
already started and others are expected within the coming months
> Most promising developments can be seen at the Kaiser Permanente Washington Research Institute in Seattle,
where scientists began a first-stage study of the vaccine mRNA-1273; the trial is funded by the National
Institutes of Health and developed in collaboration with the biotechnology company Moderna, Inc.
> In the best case, an approved vaccine will be available in several months; however, vast quantities are
needed and many companies don't have the necessary capacities for mass production yet
Two drug treatments are in clinical trials, showing first successes
> About 300 separate trials for different drugs and experimental therapies have been launched; several
treatments aiming at healing patients or alleviating symptoms are already in clinical trials
> The antiviral medicine Remdesivir, developed by Gilead Sciences, has been tested in COVID-19 patients and first
results are expected in April; the drug, originally developed to treat Ebola, is considered to have the most
reasonable prospect of healing patients in the near future
> Favilavir, another antiviral drug that was already approved for use in Japan in 2014, has shown efficacy in treating the
disease with minimal side effects in a clinical trial involving 320 patients
Source: Press research, Roland Berger 5
1 Current status
Press statements and expert opinions on the COVID-19 outbreak
"Beyond the positive actions of individual countries, as the "I think that all of us who are not experts initially
virus spreads, the case for a coordinated and synchronized underestimated the coronavirus. But now it is clear
global fiscal stimulus is becoming stronger by the hour," that this is a virus that will keep us busy for a long
Kristalina Georgieva, Managing Director IMF, on March 16, time yet. We understand that measures that seemed
2020 drastic two or three weeks ago need to be taken
now," Ursula von der Leyen, President of the
"This coronavirus is presenting us with an unprecedented European Commission, on March 18, 2020
threat. […] an unprecedented opportunity to come together
as one against a common enemy: an enemy against "Restrictions on movement of people, goods and services, and containment
humanity," Tedros Ghebreyesus, Director General WHO, on measures such as factory closures, have cut manufacturing and domestic
March 19, 2020 demand sharply in China. The impact on the rest of the world through business
travel and tourism, supply chains, commodities and lower confidence is
growing," OECD Interim Report, March, 2020
"Extraordinary times require extraordinary measures. There
are no limits to our commitment to the euro. We are "For 'round one' some hundreds of billions of fiscal stimulus in the US would be a good
determined to exploit the full potential of our tools within the start. The whole point of having a sound government balance sheet is to be able to go all
scope of our mandate," Christine Lagarde, President out in situations like this, which is tantamount to a war. Countries that are not able to do this
European Central Bank, on March 19, 2020 will suffer not just in the short run, but in the long run," Kenneth Rogoff, American
economist, Harvard University, on March 17, 2020
"The COVID-19 pandemic is a human tragedy and a global "In terms of fiscal policy, we have seen that the Spanish government, the French
health crisis, which also poses major risks for the world government, the German government – all of them are taking fiscal policy measures,
economy. We are committed to doing whatever is necessary essentially to create a sort of 'bridge' for this temporary period in which we are dealing with
to ensure a strong global response through closer the health crisis and this infection. […] measures have been taken at the national level. At
cooperation and enhanced coordination of our efforts," G7 the European level, that's a different question," Luis de Guindos, Vice President European
Leaders' Statement on COVID-19, on March 16, 2020 Central Bank, on March 19, 2020
Source: Press research, Roland Berger 6
2 Scenario analysis
We focus on our "delayed cure" scenario and describe two sub-
scenarios depending on the duration of the economic disruption
In focus
Scenario
analysis 1) Fast recovery 2) Delayed cure 3) Profound recession
Scenario > Outbreaks in Europe can be > Number of new infections rapidly > High number of infections in Europe
description contained, while China is already slowing down in China and other and the US over a longer timeframe,
getting back to normal Asian countries (e.g. South Korea) full lockdown in place
> Effective measures in the US > Europe and the US to see > Many companies go out of business,
prevent a broad spread exponentially growing number of unemployment increases
new infections over the next weeks significantly
Update > Exponential growth of outbreaks > Mitigation efforts ranging from > Scenario still valid but with higher
and stricter countermeasures shutdowns to full lockdowns in downside potential
taken by European and US Europe/the US increase the > Demand shock across a range of
governments make this scenario uncertainty about economic future industries is a possibility, global
no longer realistic. Domestic > Impact depends on how long supply chains severely disrupted as
production in Europe is hit hard, lockdowns/strict measures remain factories remain closed and
consumer confidence is in place: 4 weeks or much longer? bankruptcies occur in large
declining, US economy is exposed > We develop 2 scenarios for a numbers
delayed cure
Assessment Not realistic ✗ Current situation ✓ Still possible …
Source: Roland Berger 7
2 Scenario analysis
The intensity of global economic disruption is largely dependent on
when and how long different regions take to contain the disease
Schematic development of COVID-19 pandemic
Number > Measures to mitigate/
of new contain the spread of
infections
COVID-19 remain in
Plateau place until a reduction
No further
growth of
of new infections is
new achieved
Spread
infections
Contraction > While the disease has
Number of new been successfully
Exponential
growth of new infections contained in China,
infections decreases Europe and the US are
still experiencing high
growth in new cases
> An end to economic
disruptions can only be
expected when all
Time regions see decreasing
numbers of new cases
Source: Roland Berger 8
2 Delayed cure
We compare two scenarios of a "delayed cure": 4 weeks of
economic disruption and 12 weeks of economic disruption
Delayed cure
Key questions
> What impact will a
lockdown have on
A 4 weeks of economic disruption B 12 weeks of economic disruption
the European > Increasing number of new infections in Europe > Increasing number of new infections in Europe
economy? and the US and the US within the coming 6-8 weeks
> A shorter period of 4 weeks of economic > 12 weeks of heavy economic disruption leads
> Can the COVID-19 disruption leads to negative growth in Europe to deeply negative growth in Europe and the
outbreak in North and the US in Q2 2020 due to the shutdown of US in Q2 2020 due to the strict lockdown
America be schools, universities, restaurants, shops, etc., measures necessary to contain the virus
effectively quarantine measures and other lockdowns
contained? > In China, prolonged lockdowns in Europe and
> In China, lockdowns in other countries dampen the US hamper the economic recovery for a
> How will the the economic recovery to only a minor extent longer time, growth in Q2 2020 still below
economic crisis in due to strong domestic demand – Recovery in growth in base case
Western economies Q2 2020 assumed
affect China's path
to recovery?
Source: Roland Berger 9
2 Delayed cure
Depending on region and length of economic disruption, GDP is in
steep decline, impact is ranging from -1.9 up to -7.1 ppts. in 2020
Base case 2020
(Pre-COVID-19 forecast) A 4 weeks of economic disruption B 12 weeks of economic disruption
6.0 4.1 -1.9 ppts. 2.7 -3.3 ppts.
1.0 -2.4 -3.4 ppts. -4.8 -5.8 ppts.
1.7 -2.5 -4.2 ppts. -5.4 -7.1 ppts.
3.3 0.2 -3.1 ppts. -1.9 -5.2 ppts.
Percentage
GDP growth 2020 [%] point Delta to GDP growth 2020 as forecasted in base case
Source: Roland Berger 102 Delayed cure
China successfully fought the coronavirus, but its economy may
suffer for a longer time due to a lack of demand from abroad
A 4 weeks of economic disruption B 12 weeks of economic disruption
COVID-19 > Chinese government's measures have been effective, number of new > Social and economic life is only slowly returning to normal, pre-COVID-19 levels
infections is close to zero not reached before Q3 2020
spread > Quarantine measures are successively reduced, social and economic life is > While domestic demand goes back to normal, exports to Europe and the US are
returning to near normal by Q2 2020 hampered for a longer period of time
Delta to 2020 -1.9 ppts. 2021 0.5-6.5%
ppts.
pt. Delta to 2020 -3.3 ppts. 2021 0.9-6.5%
ppts.
pt.
15 base case 15 base case
Estimated effect on
10 10
qoq annualized
qoq annualized
growth in %
growth in %
economic growth
5 5
0 0
-5 -5
-10 -10
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019 2020 2021 2019 2020 2021
Pre-COVID-19 forecast Impact of COVID-19 Pre-COVID-19 forecast Impact of COVID-19
> Negative growth in Q1 2020, strong recovery in Q2 2020 > Negative growth in Q1 2020, mild recovery in Q2 2020, stronger recovery in Q3
Assessment of
economic impact
> Economic activity still suffers from the closure of production sites and lack 2020
of demand from US and Europe, however only for a short period > China's economy suffers for a longer period as demand from US and Europe has
> Production returns to normal, as pent-up domestic demand sets in and plummeted
important trading partners (e.g. Japan, S. Korea) lift lockdowns > Domestic demand increases after containment of COVID-19 outbreak, but cannot
completely compensate for lack of international demand
> Factories producing below their capacity limit
Source: Roland Berger 112 Delayed cure
Europe has yet to prove that government actions are effective –
Economic impact ranging from -3.4 to -5.8 ppts. in 2020
A 4 weeks of economic disruption B 12 weeks of economic disruption
COVID-19 > Exponential infection rates in most European countries > Number of infections steadily increasing, governments forced to tighten restrictions on
> However, strict mitigation measures imposed by governments are effective, social and economic life (full lockdown)
spread number of new infections declining at the beginning of Q2 2020 > Declining numbers of new infections from mid-Q2 2020
Delta to 2020 -3.4 ppts. 2021 0.5
-6.5%
ppts.
pt. Delta to 2020 -5.8 ppts. 2021 0.5
-6.5%
ppts.
pt.
10 base case 10 base case
Estimated effect on
qoq annualized
qoq annualized
growth in %
growth in %
economic growth
0 0
-10 -10
-20 -20
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019 2020 2021 2019 2020 2021
Pre-COVID-19 forecast Impact of COVID-19 Pre-COVID-19 forecast Impact of COVID-19
> Recession in 2020 (negative growth in Q1 and Q2 2020) > Recession in 2020, steep drop in growth in Q2 2020
Assessment of
economic impact
> Limited shutdown of production sites, shops, etc. > Extensive shutdowns, many non-essential production sites are closed down
> Consumer confidence damaged, but recovers relatively quickly again > Massive fiscal stimulus in an attempt to mitigate the effects of lockdown
> Significant number of companies need to resort to short-time work and/or > Consumer demand and consumer confidence heavily affected
governmental support > Substantial rise in unemployment (esp. in services sector)
Source: Roland Berger 122 Delayed cure
If infection rates continue to rise exponentially, the US economy will
be deeply affected as companies cut staff rapidly
A 4 weeks of economic disruption B 12 weeks of economic disruption
COVID-19 > Measures taken by federal government and state governments dampen the > Exponentially increasing number of new infections for a longer period
rate of new infections by early Q2 2020 > Very strict government actions eventually lead to a decline of new cases by end
spread of Q2 2020
Delta to 2020 -4.2 ppts. 2021 0.6
-6.5%
ppts.
pt. Delta to 2020 -7.1 ppts. 2021 0.9
-6.5%
ppts.
pt.
10 base case 10 base case
Estimated effect on
qoq annualized
qoq annualized
growth in %
growth in %
economic growth
0 0
-10 -10
-20 -20
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019 2020 2021 2019 2020 2021
Pre-COVID-19 forecast Impact of COVID-19 Pre-COVID-19 forecast Impact of COVID-19
> Recession in 2020, deeply negative growth in Q2 2020, recovery in Q3 > Recession in 2020, very deeply negative growth in Q2 2020, recovery not before
Assessment of
economic impact
2020 Q4 2020
> Car producers and other companies halt production but only until the first > Lengthy disruption of production
weeks of Q2 2020 > Although companies are supported by governmental relief packages, many cut
> Consumer confidence only stirred, not shaken their staff numbers, leading to lower consumer demand. The situation is
> Quick recovery based on the strong US economy, the stable domestic exacerbated by the bursting of asset (housing) and credit (credit cards, student
consumer and governmental demand and governmental relief packages loans) bubbles
Source: Roland Berger 132 Profound recession
If long-lasting economic disruption leads to structural damage to
the economy, a profound recession is possible
Base case 2020
(Pre-COVID-19 forecast) 3 Profound recession
-5.7 ppts.
> In this scenario, many
6.0 0.3
companies go out of
business; it takes a
long time to rebuild the
-10.3 ppts.
economy
1.0 -9.3
> Very high
unemployment strains
both society and the
1.7 -10.4 -12.1 ppts. economy
> Governments lack
suitable instruments
and fiscal firepower to
3.3 -5.7 -9.0 ppts. stimulate economic
growth
Percentage
GDP growth 2020 [%] point Delta to GDP growth 2020 as forecasted in base case
Source: Roland Berger 142 Economic impact
Tourism/travel, airlines and retail industry are struck first, with strong
exposure to short-term liquidity and profitability challenges
High
Tourism &
Travel
Airlines
Profitability impact 2020
Retail
Financial Services
(excl. FMCG)
Moderate liquidity impact with limited ability for earnings to catch up after crisis Significant liquidity impact with limited ability for earnings to catch up after crisis
Automotive
Mechanical Oil &
Engineering Gas Logistics
Construction
Pharma &
Medtech
Moderate liquidity impact with partial ability for earnings to catch up after crisis Significant liquidity impact with partial ability for earnings to catch up after crisis
Low Short-term liquidity impact High
Source: Roland Berger 152 Economic impact
Tourism/travel and airlines severely affected – Logistics and automotive
might be able to partially compensate, with catch-up effects after crisis
Overall
Industries (1/2) impact Short-term liquidity impact Profitability impact 2020
Tourism & > Short-term cancellations of travel bookings requires > Main vacation period from Jun-Aug heavily impacted
reimbursement of (pre-)payments by travel restrictions and consumer reluctance
Travel > Cash inflow significantly reduced due to absence of > Only limited catch-up after crisis has ended, putting
new bookings 2020 results under immense pressure
Air- > Short-term cancellations and tendency towards > Globally imposed travel restrictions will significantly
flexible bookings lead to cash shortage reduce 2020 results since rebound effects are
lines > Long-term financing of aircrafts limits possibilities to limited after crisis has ended
adjust cash outflow accordingly > Highly interlinked with tourism and travel industry
Retail > Cash inflows under pressure in non-FMCG retail > Reduced overall demand leads to a shortfall in sales
segment due to drastically reduced demand > Due to short product lifecycles and fast-moving
(excl. > Fire sales and e-commerce allow for short-term products, rebound effects are expected to be weaker
FMCG) liquidity recovery than in other industries
Auto- > Capital-intensive business with mainly fixed costs > Demand reduced during crisis, with mainly fixed cost
> High dependence on demand from OEMs leads to structure impacting esp. automotive suppliers
motive liquidity constraints for suppliers > However, China's path to recovery might allow firms
> Lower impact on OEMs due to higher cash reserves to partially make up for losses endured during crisis
Logistics > Mainly fixed cost structure leads to constant cash > Significant drop esp. in sea freight demand due to
outflows with limited options for adjustment temporary production stops
> Demand reduction puts additional pressure on cash > However, rebound effects will allow for partial catch-
inflows due to lockdowns in Western economies up when situation relaxes
High impact Low impact
Source: Roland Berger 162 Economic impact
Financial services threatened by distressed corporate financing – Price
war puts energy/oil industry under additional pressure
Overall
Industries (2/2) impact Short-term liquidity impact Profitability impact 2020
> COVID-19 triggered demand crash for flights/traffic > Decrease in industrial production and traffic reduces
Oil & Gas global demand – and leads to inventory devaluation
> Saudi/Russian price war on top – Flooding the market
> Industry has crisis experience and some flexibility > At oil price of 30 USD/bbl upstream FCF close to zero
with 3rd party oilfield services, but is capital intensive > Rebound effects partially possible – i.e. from China
Financial > Low interest rates and monetary policy measures > Depreciation of distressed and bankrupt corporate
provide financial aid during the crisis financing puts 2020 results under pressure
Services > Distressed companies and bankruptcies lead to > In addition, regulatory requirements on core capital
reduction of cash inflows might lead to fire sales of credit portfolios
Mechanical > Long lead times of existing projects and service > Industry suffers from lower order volume since 2018
business support cash inflows (dep. on segment) > Cancellation of projects will dramatically reduce
Engineering > Cost structures mainly fixed but with options for fast profitability. However, service business continues to
adjustment when orders canceled/reduced support bottom line
Construc- > Reduced cash flow due to reduced demand for > Profitability under pressure due to reduced demand
construction materials triggered by increasing delay during and after crisis
tion1) of newbuild and renovation projects > Rebound effects due to economic recovery plans
> Adjustment through temporary layoffs of workers possibly allow the industry to catch up after crisis
Pharma & > Cash inflow negatively impacted only for selected > Comparatively low negative impact on profitability
producers of medications / equipment focusing on due to grounded salesforces, delays in market entry
Medtech elective procedures / non critical products and regulatory processes
> Generally high liquidity reserves > Selected firms to benefit, esp. suppliers of COVID-19
specific treatments/vaccines
High impact Low impact 1) Construction material and (distribution) industry impacted more than Contractors industry
Source: Roland Berger 172 Economic impact – Deep dive Construction Germany
Across the construction sector, market players start to perceive
economic effects from COVID-19 and expect more to come
"The current development of the corona virus is "75 % of domestic construction "Companies are particularly affected
also affecting the construction industry. It is still companies believe that the corona virus by the current border closures, as
difficult to estimate the extent to which the will have an impact on construction personnel from neighboring EU
pandemic will affect the construction industry”, operations "due to sickness absence, lack countries are no longer coming to the
Felix Pakleppa, CEO of Zentralverbands of goods and services or liquidity construction sites and there is a risk of
Deutsches Baugewerbe, March 20, 2020 bottlenecks in the coming days and work stoppages”,
weeks”, DIHK, March 21, 2020 Hauptverband der Deutschen
Bauindustrie, March 18, 2020
"Even during the corona crisis, construction is proving to be
an industry in which external shocks have a delayed effect. At "[Keep construction sites operational important] in order to
present, the problems are still manageable”, Dr. Robert avoid many thousands of job losses, the closure of thousands
Momberg, CEO of Bundesindustrieverband Ost, March of businesses and delays and cost increases on crucial
20, 2020 programmes and projects”,"
UK Construction Industry Council (CIC) on March 17,
2020
"The restrictions in public life in connection with corona
virus prevention have a massive impact on our "What the companies need most urgently
construction operations. Having weighed up all interests is liquidity to secure production processes
and above all social responsibility, we feel compelled to and wage payments”,
take this drastic step [and closed 1,000 sites in Austria]," Zentralverband Deutsches
Thomas Birtel, CEO of STRABAG, March 20, 2020 Baugewerbe,
March 20, 2020
Source: Press Research, Roland Berger 182 Economic impact – Deep dive Construction – Example Germany
The construction market will see most probably highest impact with a 6 to 12-
month delay compared to overall economy – Example Germany
Delayed cure A Delayed cure B Profound
(4 weeks of economic disruption) (12 weeks of economic disruption) recession
GVA2) 2020 -1.8 ppts. 2021 -0.8
-6.5%
ppts.
pt. GVA 2020 -2.7 ppts. 2021 -4.1 ppts. GVA 2020 -4.7 ppts. 2021 -7.8 ppts.
impact impact impact
qoq annualized
20 20 20
growth in %
against
15 original 15
15
forecast
10 10
10
5 5
0 0 5
-5 -5
0
-10 -10
-5
-15 -15
-20 -20 -10
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019 2020 2021 2019 2020 2021 2019 2020 2021
Forecast Impact of COVID-19
> Reduction in new order demand due to market > Decline due to increasing amount of > Severe decline in both supply and demand in
uncertainties especially in renovation, mainly in postponement or cancellation of projects still in all segments impacting 2020 and 2021 strongly
the commercial segment followed with delays in ideation or planning/design phase, mainly in > Slow recovery from Q1/2021 but catch-up
renovation in residential due to economic commercial and multifamily houses effect not in 2021
issues of residents. Slow down in new built > Further more fast stop and postponement of
projects especially in commercial will lead to mainly bigger renovation projects
impact on by Q1/2021
> Full recovery not before Q4/2021
1) Based upon above assumptions with regards to European economy, slightly overpropotional impact on Germany in particular plus underproportional impact on construction 2) Gross value added (GVA) comparison to forecast
19
Source: IHS Markit, Roland Berger2 Economic impact – Deep dive Construction – Example Germany
Commercial segment will most probably experience the strongest
impact, potentially shifting activities towards residential/infrastructure
Delayed cure A Delayed cure B Profound Indicative
(4 weeks of economic (12 weeks of economic
disruption) disruption) recession
GVA1) -6.5%
2020 -1.8 ppts. 2021 -0.8 ppts. GVA 2020 -2.7 ppts. 2021 -4.1 ppts. GVA 2020 -4.7 ppts. 2021 -7.8 ppts.
impact against original pt. impact impact
forecast
2019 2020 2021 2019 2020 2021 2019 2020 2021
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Residential
Residential > Expected to be less affected immediately as planned, financed
Assessment of segment impact
New Built and currently being built dwelling will be delivered. Nevertheless
in profound recession long impact due to poor economic situation
Residential of buyers
R&R2) > R&R also less impacted due to crisis resilience seen after
previous downturns, e.g., financial crisis in 2007/2008
Commercial
New Built Commercial
> New build planning expected to be put on hold quite promptly due
Commercial
to uncertainty of economic situation of investors
R&R2) > (with R&R having faster impact)
Infrastructure/
public
buildings Infrastructure/Public buildings
New Built > Impact forecast to be limited since most projects are backed by
Infrastructure/ the government/public hand, possibly also with investment
Public
building programs
R&R2)
Low impact Medium impact High impact 1) Gross value added (GVA) 2) Repair and renovation
Source: IHS Markit, Roland Berger 202 Economic impact – Deep dive Construction – Example Germany
Across the value chain, stakeholders will be confronted with severe
economic consequences – Many are already urgent today
1 Financing/ Management 2 Planning/Design 3 Building/Execution 4 Facility management
Suppliers and distributors,
Investors, owners Architects, engineers Facility managers
contractors
> Reduced investment > Existing planning > Higher demands in terms
basis due to overall processes for new built to of hygiene and workplace
market uncertainty be canceled safety
> Budget reduction > Less project orders and > Increased cost pressure
for future projects planning requests due to reduced budgets
> Postponement of
renovation works
Material suppliers and distributors Contractors/Construction companies
> Reduced cash flow due to less demand for construction material > Hindered or denied site access due to COVID-19 measures
triggered by increasing delay of new built and renovation projects slowdown projects (in Austria already closure of sites)
> Difficulties in product delivery due to lack of Eastern European > Shortage of labor due to illness and closed borders to Eastern
drivers and/or employees' illness European countries (c.7.5% of employees in German
> Hurdles in the supply chain for raw materials due to COVID-19 construction sector)
cross-border measures > Delays in or refusal of invoice payments leading to issues in
> Reduced orders due to less building activities companies' liquidity
> Less overall construction demand due to reduced investment
volume – Leading potentially to consolidation developments
Today Future
Source: Roland Berger 213 Reactions
Monetary and fiscal responses are undertaken in Europe and USA –
Situation in China seems to be relaxing
Corporate Public
Newsflash: Production shutdown: Rolls-Royce is suspending production in UK for two Bond purchasing by the ECB: The European Central Bank has announced an
weeks, followed by a two-week idling; other car manufacturers including emergency bond purchase program of €750 billion, involving securities from the
Selected Volkswagen, Daimler, Ford, Fiat Chrysler Automobiles, the PSA Group, public and private sectors; the program will not stop before the end of the year
examples Renault, Ferrari and Ducati have all announced new shutdowns
Fiscal measures by EU countries: Germany, UK, France, Italy and Spain will
provide significant liquidity assistance to companies, including deferred
Travel restrictions, remote working and office closures: Twitter, Apple, payments of social charges, tax breaks, state-backed loans and temporary
Google and Microsoft and other major companies have restricted business unemployment measures
travel and asked employees to work from home; Google has started to shut
down offices Government-backed loan in the UK: £330 billion of guarantees, equivalent to
15% of UK's GDP, for any business that needs access to cash; SMEs are offered
Warehouse closures: Amazon closed a facility in New York after a warehouse loans of up to £5 million with no interest charged in the first six months
worker tested positive for the coronavirus, the first known incident affecting a
worker at a US Amazon warehouse; the company is also performing Relief packages in the US: The Fed cut the benchmark interest rate to 0%-
additional cleaning activities and has sent workers home on full pay 0.25%; bond-buying program of $700 billion; coordinated efforts with five other
central banks to provide cheap global access to US dollars; short-term back-up
loans for national banks. The "$1 trillion" fiscal rescue package is still pending
Reduction of hours: Walmart is cutting the opening hours of many of its
4,700 stores and introducing special shopping hours for people aged 60 and Fiscal aid in Canada: The government will spend up to $82 billion, more than
older; other stores have recently announced similar hours for older 3% of Canada's GDP, including $27 billion in direct support for Canadian workers
customers, including Target, Whole Foods and Dollar General and businesses
Level of
measures
taken 0 4 7 10 0 5 8 10 0 4 7 10 0 6 9 10 0 6 8 10 0 4 7 10
Moderate Aggressive As of this week As of last week
Source: Press research, Roland Berger 223 Reactions
The COVID-19 pandemic requires immediate securing of liquidity and
cost ramp-down while preparing for the time after the crisis
1 2 3 4 5 6
How can we How can we What will be How can we How do we How can we
secure short- adjust our the impact on reorganize protect our ramp up our
term liquidity cost base profitability for our current long-term business after
during the during the 2020 and business/ business the crisis?
crisis? lockdown beyond? operating model
period? model to
work under
crisis?
Source: Roland Berger 233 Reactions
Roland Berger has developed a range of solutions to support
companies in the current COVID-19 crisis
Scenario Analysis/State Aid
> Calculation of financial effects to prove liquidity need for
360° Check-up investors, banks and state aid
> Identifies operational
and organizational Emergency Room
risks connected with > Establishes a COVID-19 task force to
COVID-19 monitor further developments and
take effective actions
Performance Program Cash Office
> Develops a short- and medium-term > Establishment of a cash office
program to stabilize the company to plan and control liquidity
> Addresses key challenges of how to development
ramp down costs during crisis, prepare > Implementation of internal and
for business ramp-up afterwards and external measures to secure
potential adjustments to long-term financing
business model
Digitization
> Supporting business and operating
model by increase digital means 24
Source: Roland Berger3 Reactions – 360° Check-Up
A 360° Check-Up involves screening key areas for problems in order
to safeguard your company's ability to operate
Deliverables
Employee > Fast actions to ensure that the
health Operational workforce is healthy and
business prevent/delay the spread of COVID-19
in the company
> Actions to safeguard the operational
360° core of the business, incl. upstream
and downstream value chain
Check-Up > Actions to keep core administrative
functions operating
Commu- > Targeted and professional crisis
nications Corporate communications
headquarters
Source: Roland Berger 253 Reactions – 360° Check-Up
Screening is done on the basis of focused checklists
360° Check-Up – Checklist (selected items)
Employee health Operational business
> Review and development of appropriate > Identification of critical resources
guidelines for employees and relevant > Availability of inventory stocks
departments/service providers, e.g.:
> Safeguarding of supply chains
– Expansion of hygiene measures
✓ ✓
> Switching to alternative suppliers,
– Extension of home working delivery channels or resources
– Selective restriction of travel activity
Corporate headquarters Communications
> Review of the ability of critical functions to > Targeted, professional and regular
operate (e.g. Accounting, HR) communications to employees and external
> Availability of (resilient) IT systems stakeholders
and resources
> Identification of interface problems
between functions/departments ✓ ✓
Source: Roland Berger 263 Reactions – Scenario Analysis
Liquidity need due to Corona has to be calculated and proven for
external capital providers
New uncertainties… … impose challenges … … and insecurity
High for the company: for capital providers, e.g.:
Supply-chain on operations Equity investors
Increased illness rates disruptions
of employees
New government regulations Banks
Impact and liquidity
Raw materials pricing
Short-term contract Government
cancellations (state-aid)
Supplier bailouts
to evaluate opportunities to support the
Low Level of uncertainty High company in financing the cash-need
COVID-19 leads to different risk profiles of various Influence operations and hence financial Capital providers need transparency and
internal and external factors situation and outlook of the company additional security
External assessment required
Source: Roland Berger 273 Reactions – Scenario Analysis
Roland Berger scenario analysis enables you to quantify additional
financing requirements and to obtain an official external assessment
Illustrative
Input Output
Roland Berger scenarios Revenue Official
Output Base Roland
Berger
High assessment
Fast
recovery
of liquidity
need
Delayed cure EBITDA
Profound Base
Low
recession to be used in
Historic Future Time discussions
Today with
investors,
Cash flow banks and
Roland Berger Analytics & experts Base government
Continuous analysis and assessment of (state-aid)
crisis progression for selected regions
and industries
Source: Roland Berger 283 Reactions – Scenario Analysis
Roland Berger Analytics and our experts are now continuously
evaluating the potential economic impact of COVID-19
Outbreak and
spread
> Overview of latest
case numbers and
developments in key
regions
Economic
effects
> Effect on the
(global) economy,
industries and
companies
> Scenarios for
selected regions
Source: Roland Berger 293 Reactions – Emergency Room
The Emergency Room combines PMO and task force for all challenges
caused by COVID-19 – ensures the delivery of all designated actions
1 Organization/
management 2 Action
tracking 3 Task force
(PMO)
> A Project Management Office is > A cloud-based action tracking > Establishes central capacity
set up as the central control hub tool is put in place to monitor for ad hoc deployment
COVID-19 > It issues updated situation and report on the defined
actions
> Conducts any short-term
reports on a daily basis analyses required
Emergency > Hotlines are installed for > Ensures fast response to
Room employees, customers, suppliers
and other stakeholders
short-term bottlenecks in
critical areas
Source: Roland Berger 303 Reactions – Emergency Room RBboost is used as a proven tool for tracking the actions being taken RBboost project management tool > With RBboost, Roland Berger offers a dedicated cloud- bases project management tool > The software is ready to use within a day and can quickly be adapted to client needs and even offers multi-device support > The software provides support for the delivery and reporting of actions and thus frees up capacity for value-creating activities Source: Roland Berger 31
3 Reactions – Performance Program
The COVID-19 Performance Program proactively
supports the sustainable stabilization of your company
Immediate actions Medium-term actions
> Identification and delivery of immediate > Identification and delivery of actions to
actions to quickly improve profit and COVID-19 protect profit and liquidity for future global
liquidity, e.g. Performance crisis, e.g.:
– Reduction of agency staff – Develop new sales markets
– Temporary short-time working Program
– Adjust the value chain and footprint
– Temporary plant closures – Insource central functions
– Temporary investment freeze
– Short-term working capital
management Ramp-up actions
> Identification of actions to start business again after corona crisis
– Inform and involve suppliers and clients
– stabilize flow of raw material and finished goods
– ramp-up of production
Analysis of potential (top-down/bottom-up): Based on benchmarks and experience from
more than 2,000 performance programs conducted
Source: Roland Berger 323 Reactions – Digitization/Business Model
We develop levers for current business models to ensure customer
contact, resource utilization and labor shortage reduction
Deep-dive construction: Selected levers to reorganize current business models
Current situation Key questions Our approach
Lack of customer > How can customers and building > Development of digital platforms that use
material suppliers/distributors stay in avatars to consult and interact with customers
contact as sales contact and continue business > Integration of sales reps in digital solutions for
reps and relationships? individual pick-up of customers
customers cannot > How can sales reps be leveraged that > Creation of digital customer fares and
are currently not able to personally visit conferences to exchange on latest industry and
meat in person customers for CRM? COVID-19 developments and provide support for
anymore customers
Worsened labor > How can labor shortages of Eastern > Review of working plans and prioritization of
European and ill workers be projects
shortage due to compensated for to continue with > Evaluation of potential options to hire workers
closed borders ongoing projects in the short-term? from different industries that are currently shut-
and more cases > What long-term options exist to be down
better prepared for future labor > Development of strategies to increase share of
of illness shortages? modular and pre-fabricated construction which
address general labor shortage on- and off-site in
the industry leading to more standardized and
efficient construction of buildings while saving
labor, costs and time
Source: Roland Berger 33Our senior task force and performance team is ready to help
Construction RB COVID-19 task force
Dr. Kai Dr. Sascha Dr. Gerd Dr. Peter
Schober Haghani Sievers Magunia
Frankfurt, Munich, Stuttgart,
Munich
Germany Germany Germany
kai-stefan.schober@rolandberger.com
+49 160 7448372
info@rolandberger.com
34You can also read
