Construction contractors say they are cautiously optimistic about the future of their industry, crediting the federal infrastructure bill for some of the upbeat outlook.
That’s according to the 2022 Marcum National Construction Survey, which found a post-pandemic comeback gaining momentum.
Nearly 60 percent of survey respondents said they expect more opportunity in the future, which is up from 54 percent in 2021 and 69 percent expect the Infrastructure Investment and Jobs Act to have a positive financial impact for their businesses, according to the Marcum report.
Material price volatility remained the top issue for construction company executives, followed by healthcare and insurance costs. Workers’ compensation issues jumped to number three, edging out income taxes. Eighty-nine percent of survey respondents said jobs were delayed by material shortages, labor shortages, or both at some point during the year.
“Broadly speaking, the construction industry is finally returning to pre-pandemic levels of activity but is still being hampered by three familiar challenges – labor shortages, material costs and availability, and supply chain issues,” Marcum Partner Roger Gingerich, who leads the firm’s Midwest construction practice, said in a company statement. “Most respondents are positioning for growth and looking for ways to thrive in a very dynamic space. This includes an uptick in joint ventures, something we think makes sense given the difficulties in securing skilled labor and materials in a sector where there is both high demand and deep competition.”
The survey found that 95 percent of respondents increased worker pay to combat labor shortages and of those, 67 percent offered raises of 4 percent or more, and 13 percent increased compensation by more than 8 percent.
The industry’s rosier outlook is also supported by a significant increase in backlogs, with 48 percent of survey respondents, up from 29 percent last year, reporting higher backlogs than the previous year.
Companies restructuring for growth climbed from 28 percent in 2021 to 40 percent this year and 23 percent of respondents said they are seeking M&A opportunities, up from 13 percent a year ago.
“Mergers and acquisitions deal value in the global construction sector nearly doubled last year, and that mirrors what we’re seeing among our clients. We’re also seeing better structure around those deals, indicating increased sophistication in these transactions,” Joseph Natarelli, national leader of Marcum’s Construction Services practice, said in the statement. “Ongoing high backlogs are increasing the attractiveness of the construction sector for private equity. Supply chain issues and material cost increases are making it more advantageous for bigger players to pool purchasing power, while shortages of skilled labor and increasing specialization are both driving consolidation within the trades. Finally, many construction companies are emerging from the pandemic without a succession plan, and M&A is an option for them.”
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