Construction Industry on a ‘Bumpy Ride’ after COVID 19

Material shortages, skilled labour shortages, environmental regulations, increased project costs, and material delivery delays still plague the construction industry

The entire global commerce was impacted deeply by the COVID-19 pandemic mainly attributed to lockdowns that began in 2020 and persisted until the end of 2021. Recovery since has been slow for most industries such as the hospitality industry and even slower for others such as the construction industry. The slow recovery seen within the scope of the construction industry is however not associated with poor demand factors as most would think as demand for construction is strong. The slower recovery of the construction industry is mainly attributed to the challenges faced currently by construction contractors associated to material shortages, labour and skill shortages, increased project costs and logistics.

The time when construction materials were readily available (pre-pandemic) has gone  the way of the dodo as it has become difficult to obtain construction material and even when they are available the long lead-times disrupt project schedules. The bright side to this issue is however the fact that contractors have resorted to using construction material substitutions that in most cases have been found to not just support schedules, but also keep budgets in check. Contractors have also moved towards communicating project timelines more diligently with suppliers and paying cash in order to obtain materials on time which is effective to a significant degree. The skilled labour shortage that has plagued the industry recently is due to the exit of skilled labour from the industry during the pandemic to seek other sources of income. Most of these skilled labourers and construction heavy machine operators such as excavator and crane operators never returned. In response to this scenario contractors are taking machines such as excavators for hire that come with technological features such as grade assist. These technologies allow even novice machine operators to grade and finish equally as well as experienced excavator operators. Taking construction equipment such as excavators for rental has another bright side which is cost and renting excavators keeps the cash flow of construction companies healthy based on the fact that these machines (especially new models) can be quite pricy. According to Associated Builders and Contractors (ABC) millions of construction workers left the construction industry and established themselves in other industries and now that the construction industry has resumed the labour issue have not and contractors are left with no choice but to hire inexperienced workers to fill the gap. The shortage of workers has also driven wage cost up and the shortage of material has also driven prices of construction material higher than ever before. All of this ultimately increases operational costs and lowers revenue and profit margins extensively as supply chain disruptions impact construction costs directly which makes it difficult for these companies to remain within budget.

These primary issues associated with material and labour shortages requires alternative out of the box solutions to maintain budgets and keep project costs low. Among the only options that are available to general contractors is maintain healthy cash flows by taking construction equipment such as skid steers on rental which does not impact capital structure and bank balances. The funds should be focused more on cash payments for material which not only appeals to suppliers, but also commands significant discounts attributed to COD transactions. Using technology and machines to overcome the labour shortages is another option that would assist construction companies to remain afloat for the time being. E-Solution indicated that things within the spectrum of the construction/ building industry is only likely to return to pre-pandemic states in 2025, until which time the ride is going to be as bumpy as bumpy gets.

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