If you’re running a construction business, you’re not alone if you’re tossing in your sleep. A recent survey by the Associated General Contractors of America (AGC) found that COVID-19—and its disruption of the supply chain—remains a top concern throughout the industry, even as public infrastructure dollars get flowing. Hiring also remains a concern.
Higher Costs, Lower Profits
Summarizing the findings of AGC’s 2023 Construction Outlook National Survey, Construction Dive reports “Contractors’ biggest concern for the coming year is the supply chain. The ongoing issues cause project delays, time-consuming logistical headaches and price hikes for materials.” Nonetheless, federally funded infrastructure work has many builders feeling bullish while private sector work continues to raise the most anxiety:
As inflation and the specter of a recession continue to loom, contractors are feeling less confident about private sector work. Builders have reason to be worried: last year 36% of respondents had projects canceled or postponed but not rescheduled. The main reason given, for about half the projects, was rising costs.
Although contractors are optimistic overall, that doesn’t mean there aren’t rocky times ahead, said AGC Chief Economist Ken Simonson in a webinar last week about the survey. “Even when we’ve had recessions or slow growth expectations for the economy, contractors are by nature optimists,” Simonson said. “But it is notable that in nearly all of these categories, particularly on the private side, contractors have lower net positive readings or deeper negative readings than they did in previous years.”
In the past year, coping with supply issues found 70% of builders accelerating purchases once contracts were won, while about 50% sought alternative suppliers and materials and roughly 22% “stockpiled items before winning contracts.” Another concern keeping construction company owners up at night is predicted to become even more challenging in the year ahead:
Workforce shortages make projects take longer and cost more, and look set to worsen in 2023. In the coming year, 69% of contractors expect to hire and only 11% expect to reduce their headcount, according to the survey. To entice workers, last year 72% increased base pay rates more than in 2021 and about a third boosted bonuses and benefits. Despite those efforts, 80% are currently having difficulty finding workers and a majority of respondents expect those difficulties to persist. Plus, 83% of contractors worry the shortage and resulting inexperienced skilled labor pool will pose a challenge to the safety and health of their firm’s workers — the biggest threat respondents identified by far.
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