Construction industry optimistic despite inflation, InEight report finds

by Sophie Berrill
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The Australian construction industry is facing one of its toughest periods in recent years. 

As the world starts to emerge somewhat from the pandemic, new threats loom large. 

Alongside many other industries, construction faces massive supply chain disruptions, labour shortages, increasing rates of inflation, an energy crisis and the effects of the war in Ukraine.

As a result, housing construction prices rose 15.4 percent over the 12 months to March 2022, according to the Australian Bureau of Statistics. This was due to timber, board and joinery, as well as other metal products. 

In an industry that relies on boots on the ground, labour shortages are only compounding the problem.

Increased demand for the tightening supply of resources is also placing upward pressure on output prices across all construction sectors.

But against that tumultuous backdrop, InEight has found the construction sector full of confidence, optimism and resilience.

Survey finds optimistic industry outlook 

In March 2022, the construction technology software company conducted an online survey of 300 large enterprise, capital project and construction professionals from the Americas, Europe and APAC. 

The survey included 26 questions gauging general confidence levels across the industry. It also assessed track records, plans and attitudes towards digital transformation.

The results, published in the second Global Capital Project Outlook, found 96 percent of respondents were optimistic about their organisation’s future. In the face of current risks, 91 percent alo considered their organisation to be either very or fairly resilient. 

The results aren’t that surprising. Respondents expressed similar optimism in last year’s inaugural Global Capital Projects Outlook, despite the backdrop of a global pandemic.

The context for this year’s positive outlook is that 76 percent of respondents witnessed increases in construction and capital projects spending. This is up from 68 percent in 2021.

“There’s plenty of work out there, with many projects waiting to be constructed,” InEight CEO, Jake Macholtz, says in the report.  

But the wait is the part of the problem.

On time and on budget?

Faced with staffing and supply chain issues, the percentage of projects contractors report completing on or ahead of schedule has fallen from 51 percent in 2021 to 35 percent. Similarly, the ability to complete on or under the approved budget has also fallen from 51 percent last year to 38 percent in 2022. 

Owners reported 43 percent of projects were completed on time, and 45 percent on budget. This may be a temporary discrepancy as the full effects filter through.

Digital technologies driving growth

The survey also asked respondents about opportunities for growth. 

Respondents saw digital technologies as the top driver for growth (57 percent). This was followed by economic recovery (54 percent) and then people and skills (47 percent).

Data analytics, artificial intelligence and machine learning, as well as project management and project controls software were perceived as critical to the sector’s success in the next one to three years.

Notably, those who didn’t believe their organisation had a clear digital transformation strategy in place were less optimistic. Only 27 percent were very optimistic, 53 percent were fairly optimistic, and 20 percent were not very optimistic at all.

The report found a few factors were holding organisations back from a greater technology investment.

Money was a major factor. Lack of return on existing investments and lack of available capital were the two most common reasons. 

Closely behind financial factors were change management ones. Difficulty of integrating with current systems was a top three factor for 42 percent of respondents. Meanwhile, 40 percent pointed to both difficulty of implementation and a lack of technically skilled talent.

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