Despite hopes for recovery, the construction sector faces ongoing challenges, hindering any significant improvement throughout 2024
Factors such as rising interest rates, material procurement difficulties, and regulatory crises related to energy transition continue to plague the industry. Cyberattacks, now increasingly common, alongside continuous and increasingly complex staffing challenges, further exacerbate the situation.
Sluggish Growth and Persistent Issues
A recent study by Horváth consultancy, involving over 30 board members of construction companies, revealed that 2023 concluded with a mere four percent average sales growth, half the average growth rate seen in other sectors (8.1 percent). Moreover, material price hikes and ongoing staffing changes remain significant or even severe issues for 70 percent of construction firms.
Cautious Optimism Amid Challenges
Representatives from the construction sector exhibit restrained optimism regarding the 2024 forecast. Even with a projected 5.5 percent sales increase, market recovery remains elusive, as inflationary effects nullify any real growth.
According to Maria Boldor of Horváth consultancy, “Business development in the construction industry hinges on the investment environment, influenced not only by price fluctuations and interest rates but also by powerful psychological factors such as concerns over declining property prices or uncertainties stemming from debates on stricter energy requirements.”
Prioritizing Liquidity
Not surprisingly, ensuring liquidity stands as the top priority for construction company management. Two-thirds of respondents assigned it very high priority, with over half deeming cost and profit optimization very important.
Profitability Challenges and Transformational Barriers
Declining profitability hinders the industry’s ability to undergo necessary transformations urgently needed. Consequently, innovations and the use of sustainable materials have fallen lower on the priority list. Digitalization projects have also lost significance.
Addressing Acute Issues
According to the same study, one in five construction companies fell victim to cyberattacks annually, necessitating investments in online security as a top priority. Additionally, besides material costs, employee-related expenses continue to rise, with survey participants anticipating nearly a six percent increase in staffing costs. Notably, 82 percent of respondents acutely feel the effects of labor shortages even in such a tepid market environment.
The study concludes that higher wages alone are no longer sufficient to attract and retain the skilled workers crucial to the construction industry. Companies will need to attract qualified workers through more flexible business arrangements, requiring both time and resources to design and implement effectively.