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Vaccine for economy – infrastructure investment?

As we wait our turn in line for the COVID-19 vaccine, our economy stands right beside us. With the risk of sounding bias towards the construction industry, I believe that giving our nation a “remodel” will help our economy bounce back from the pandemic.

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While certain sectors of our economy have been severely impacted by the COVID-19 pandemic, other sectors such as most construction businesses were able to keep their doors open during 2020. This is because construction services were designated as an essential business which allowed them to keep working. The Paycheck Protection Program (PPP) loans, which provided loans to businesses that can be forgiven in full if they were used to fund payroll and other costs as described under the program, also provided relief and confidence to business owners to continue operations. However, the most significant contributing factor for construction businesses to stay profitable during 2020 was that they still had backlog for contracts that were signed prior to the pandemic. At the end of 2019, most construction companies had record breaking levels of backlog. Some so significant, that the backlog at the beginning of the year was enough to generate enough work for the entire year.

However, as 2020 went on some contracts were canceled and the construction industry began to feel the effects of the pandemic. According to the Associated Contractors of America (AGC), 75% of contractors reported experiencing a project cancellation due to the pandemic in September and October 2020, a 25% increase since August 2020. According to a report released by the American Road & Transportation Builders Association (ARTBA), infrastructure projects totaling more than $9.6 billion have been delayed or canceled during the pandemic. All of these are signs of a potential downturn in the construction industry.

It has been nearly a century since our government funded major infrastructure projects to boost our economy. A bill from the new administration that includes major investment in infrastructure will not only create jobs and upgrade our current infrastructure, but will also help our nation stay on track with other nations that are already making major investments to innovate their infrastructure. Bloomberg reported that China invested $1.4 trillion for technology infrastructure, including 5G wireless networks, which will reduce their dependence on foreign technology and make them a major player in the tech race.

An investment in infrastructure should be a must for this new administration. I am excited to see what great projects are to come. What will be our 21st century Hoover Dam?

Our professionals have many years of experience working with the construction industry. If you have accounting questions about your business, don’t hesitate to contact a Henry+Horne professional adviser.

Abel Coronel, CPA