The construction industry is gearing up for a robust future, if only chronic labour shortages can be addressed, writes James French, Construction Industry Specialist, Teletrac Navman.
The findings are amongst the highlights of the results of the 2021 Construction Industry Survey (CIS), a partnership between Teletrac Navman and CCNZ, and indicates contractors are predicting growth for 2022.
More than half of New Zealand contractors (55 percent) are expecting a turnover growth in the next 12 months, which is a significant increase from last year’s 23 percent. Roading remains the biggest contributor to construction projects in 2021, followed by Three Waters and residential projects.
A resilient response
The survey was undertaken in May and June 2021 by 161 predominantly owners, directors or management-level workers in the civil construction industry of New Zealand. While it may be too soon yet to talk of a long-term recovery, contractors large and small are far more optimistic than they were 12 months ago. Their optimism is founded on greater clarity about the pipeline of work, and 30 per cent of the respondents are expecting turnover to increase by more than 10 percent. This is in line with MBIE projections that expect infrastructure activity to increase to $10.1 billion in 2025.
That said, uncertainty around procurement practices still remains a thorny issue. The industry is not immune to unpredictable outside factors, and many say that despite the general confidence in growth, current shipping delays of supplies and materials may hold back growth in some areas. Still, only four percent are expecting turnover to shrink by more than 10 per cent, which is a big drop since 2020 when 29 percent expected the same.
Covid’s lingering impacts
The impact of a potential recession due to Covid-19 is no longer a worry at the forefront of the industry. However, the pandemic continues to impact the industry via border closures and immigration issues, which are leading to skill shortages and fluctuating costs. The top three challenges to future growth in 2021 listed by the industry are: skills shortages and availability of workers, fluctuating costs and compliance and regulatory costs.
Skills shortage is the biggest reported challenge for the industry (66 per cent), and 87 per cent of the respondents would hire today if the right skills were available. This is a significant increase from 2020 where only 32 percent predicted that their requirement for staff would increase in the next year. Because of this, there is substantial support for the Reform of Vocational Education in Construction Industry and the government’s increased procurement emphasis on training and development of people.
It’s believed these initiatives will have a positive impact on the industry in the next three years. Other suggested solutions to increase availability of skilled staff including making it easier for skilled workers to enter New Zealand and encouraging younger people to join the industry.
While fluctuating cost was not a significant issue in 2020, this year 45 percent reported it being a barrier to growth. In addition, procurement is becoming more difficult with far longer lead times, with several requesting more industry regulation as a suggested solution to the problem.
Sustainability and technology
Interestingly, sustainability has become an issue of importance after the Covid-19 disruption last year. Now, half indicate that sustainability practices will impact their likelihood of winning business and 37 percent say they won new business based on broader specifications such as using local people and supply chains.
Last year was also a good lesson in resilience, as 61 percent are confident in the ability of their business to withstand change and overcome challenges. More than half say that their confidence is based on technology’s ability to improve efficiency and overcome challenges. However, construction companies are slow to adopt new tech with many still at planning and research stages. There is an opportunity here to educate decision makers on new technology and how it can help with bottom-lines in the long run.
CCNZ and Teletrac Navman’s 2021 Construction Industry Survey results are showing positive signs of resilience and recovery from a challenging last year. Moving away from potential recession concerns last year, has allowed the industry to instead focus on future-proofing their business with an increased focus on sustainability and technology.
To deal with the main inhibitors for growth, such as skill shortage, the construction industry will need increased support from government initiatives to boost training and simplify the immigration process for skilled workers.
The full results of the 2021 Construction Industry Survey is available to download from Teletrac Navman’s website on www.TeletracNavman.co.nz.