Industry segments experience different growth trajectories and increased competition

2023 could be a different year for the industry, with heightened uncertainty due to high inflation, rising interest rates, and bifurcation across various industry segments. Companies are keeping an eye on how their backlogs will play out in 2023, especially during the second half of the year. While many companies have substantial backlogs (specifically in energy-related construction and data centers), as they get through the back half of 2023, they may see the impact of a potential economic slowdown on their deliveries.

Increased lead times and volatile material costs pressure margins

Over the last two years, the COVID-19 pandemic, transport bottlenecks, and geopolitical uncertainties have exposed vulnerabilities in the E&C supply chain. These ongoing disruptions are expected to drive the E&C industry toward new business models, supported by new ecosystems that bring innovative products and services to serve the unique needs of different end markets.

Talent pressures and shifting talent models force industry to rethink workforce strategies

The E&C industry remains significantly short of skilled workers, further exacerbated by a tight labor market. Even though the construction industry has a strong pipeline of projects and spending, especially the infrastructure buildouts, it’s challenged to meet the demand due to a persistent shortage of workers and high turnover. With rising inflation and a tight labor market, companies may have to raise wages and expand benefits to attract and retain employees in 2023.

Developers and contractors further invest in emerging technologies to drive efficiencies

While the E&C sector has been historically slow to integrate and adopt digital technologies, industry players are now increasingly paying attention to and leveraging emerging technologies. Most E&C companies are utilizing digital technologies to expand business opportunities and boost profits by reducing costs in the long run and enhancing project execution. Further, with increased global supply chain disruptions, increased competition, worker shortages, and skyrocketing material prices, the need for digital transformation in construction has become much stronger.

Industry evaluates new practices to deliver positive societal impacts

Many customers are becoming more sustainability conscious and placing greater pressure on developers to lower the carbon footprint of new construction. The increasing global focus on climate change could incentivize construction companies to factor sustainability into their projects, construction processes, and designs.