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Civil construction industry confronts economic headwinds

13 Aug 2024


The Construction Industry Survey 2024 reveals declining confidence in the industry resulting from lack of projects in the market, and the expanding role of technology and diversity in improving project efficiency.

An annual collaboration between vehicle and asset management provider Teletrac Navman and industry association Civil Contractors New Zealand (CCNZ), the survey reveals a civil construction sector in crisis, resulting from a lack of work in the market.

The results of the first survey since the 2023 election paints a landscape of uncertainty, driven by a dramatic increase in the lack of work and a decline in confidence regarding future pipelines and revenue.

Rising work shortages and compliance issues
The survey highlights a severe shortage of work in the current civil construction market, with 64 percent of businesses report this to be the main issue they face, a sharp rise from 29 percent in 2023.

Additionally, 57 percent of businesses face difficulties with local and central government procurement guidelines and work consent conditions, up from 36 percent last year.

Supply chain disruptions continue to strain businesses, with 71 percent citing rising compliance costs and 64 percent reporting project cost overruns. These factors contribute to a challenging operational environment that impacts overall industry performance.

Civil Contractors New Zealand Chief Executive Alan Pollard says the industry’s landscape has dramatically changed in the past 12 months, with an acute shortage of work now being the primary challenge civil construction businesses face.

“If we conducted the survey again today, the response would be even more dire. Right now, I am fielding daily emails from our members, who are deeply concerned that their businesses may not survive.

“I can’t stress enough the importance of a well-defined, committed, and funded pipeline of work. The government needs to act quickly to restore business confidence. Promises alone won’t get things built.

“Only a committed and adequately funded programme of work will give businesses the assurance they need to invest in the people and technology required to get infrastructure works done,” says Pollard.

Revenue growth and industry confidence slump
Only 37 percent of surveyed businesses expect any revenue growth in 2024, a significant decrease from 47 percent in 2023. Confidence in the industry’s outlook has plummeted, with only 20 percent of businesses feeling optimistic about the future, while confidence in the ability to overcome challenges has declined from 62 percent in 2023 to 57 percent in 2024.

Confidence in the future pipeline of civil construction work is also bleak, with only 21 percent expressing confidence, down from 28 percent in 2023. On a slightly positive note, confidence in New Zealand’s infrastructure’s ability to handle climate change impacts has improved from 7 percent in 2023 to 13 percent in 2024.

Construction industry faces downsizing
The survey also reveals a noticeable softening in labour demand. A nationwide shortage of skilled workers has been the most significant issue in each previous edition since the Construction Industry Survey began in 2017. But that is not the case in this year’s results.

Only 39 percent of businesses expect an additional requirement for staff, down from 54 percent in 2023. This trend of downsizing reflects the industry’s response to economic conditions and operational uncertainties and the amount of forward work currently available.

Pollard says shedding staff is a tough decision for many companies.

“Given the amount of long-term infrastructure work projected, this is a poor time for the industry to down-size, but the current market means many companies are currently left with little choice,” he says.

Technology empowers businesses to win more work
Technology remains critical to enhancing efficiency and project outcomes. Key technologies such as fleet management (77 percent) and machine control (63 percent) are well-integrated on-site.

Businesses are increasingly prioritising technology, with almost 2 in 5 organisations (39 percent) now mandating specific technologies for bidding on projects, up from 27 percent in 2023. Nearly two-thirds of businesses (62 percent) emphasise the importance of onsite technology for securing contracts.

Jim French, Construction Industry Specialist at Teletrac Navman, says that the trends we’re observing in New Zealand’s construction sector are reflective of global challenges.

“In this environment of uncertainty, businesses must proactively accelerate their digital adoption to stay competitive. Advanced technologies such as fleet management, machine control, health and safety monitoring software are crucial allies – as they increase the chance of securing contracts and planning for the future,” he says.

Solutions: Strategic focus on technology and diversity
Addressing the current challenges requires strategic focus. A clearer pipeline of government projects is essential, with 56 percent of respondents anticipating positive impacts from such clarity. Embracing diversity initiatives is also crucial, as 61 percent of professionals believe diversity positively affects productivity.

Although areas like business intelligence and cost management are still underutilised, adoption rates are increasing. Cost management technology usage has risen to 67 percent in 2024, up from 59 percent in 2023, and location tracking has jumped to 72 percent in 2024 from 53 percent in 2023. This growing adoption demonstrates a proactive approach to improving operational efficiency and securing competitive advantages among businesses.

Exploring sustainable energy solutions, such as hydrogen, is also gaining traction. Over a quarter (26 percent) are exploring hydrogen as a future energy source, aligning with broader sustainability goals and preparing for a multi-energy future within the industry.

The results of the survey and the civil construction industry’s response to these challenges will be further discussed by a panel of senior construction industry leaders at The Civil Contractors Conference in Invercargill on 14 August

Download the 2024 Construction Industry Survey>>

An interactive dashboard of key findings can be viewed here.

 

 

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