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Four Trends to Watch for the Construction Industry in 2019

Companies that are aware of, can mitigate and can take advantage of these wildcards will see their strength and brand in the market increase—even in a period of expected uncertainty.
By Mike Sobolewski
February 15, 2019
Topics
Markets

By most accounts, 2017 and 2018 were successful, but balanced, years for the industry. Many companies recognized the benefits of strong backlogs and growth in a number of the industry sectors, while also seeing challenges in cost containment, product availability, talent and preparing for an anticipated overall downturn.

Engineering and construction firms often are the hardest hit when economic conditions change. Some strategies that could help position construction firms for success include using technology to improve efficiencies, renegotiating contracts with clients and suppliers and using M&A to increase market share. Even with the best-laid plans, however, unanticipated political and economic events can require organizations to change course. Agile strategies are key to managing capital projects and infrastructure.

2019 will likely see continued realization of some of these lingering concerns, while bringing new challenges to the forefront. As companies work toward making the next few years a success in the face of an expected challenging environment for the industry, there are four “wildcards” that the industry will be facing—some expected and some perhaps unexpected.

Infrastructure, infrastructure, infrastructure

The importance of this cannot be overemphasized. With the congress now split in power, infrastructure may well be one of the items where both sides of the aisle can come to an agreement. If that happens, overall economic opportunities in the coming years could be significantly strengthened for the construction industry. That being said, any infrastructure bill would have to be significant and get to the “right places” across the country for it to be really meaningful.

Cost containment

Many construction firms struggle with the issue of cost containment in today’s environment. They must recognize that technology is changing the design, procurement and construction of projects to make processes more efficient and less expensive. Similarly, leadership teams must assess the very real threat from new competition and to understand that changes in the industry require corresponding changes in their organizations.

Continued market consolidation

Economic uncertainty in the way of oil prices, tariffs and other trade concerns can impede the success of smaller firms that don’t have the diversity of their larger counterparts. On the other hand, large firms will have expectations to grow from key stakeholders and strategic consolidation can drive new, profitable revenue streams. Major movements have occurred in the industry in the last few years and this trend is expected to continue at least over the short-term. As more and more firms in the industry get acquired, it is likely we’ll start to see more “trading piece parts” between larger engineering and construction firms as they try to tailor their portfolio to their specific vision.

Cybersecurity

Companies in the construction industry must face cyber concerns on a daily basis. When engineering and construction organizations were asked in PwC’s 2018 Global Economic Crime Survey to name the most disruptive threats they anticipate facing in the next two years, respondents listed cybercrime at the top—and the numbers impacted by cybercrime in some form are quite alarming. Due to the increase in systems interconnected for the business to operate effectively, organizations now face a higher degree of unknown cyber risk, with many systems vulnerable, including manufacturing plants, distribution, construction and corporate. And the potential impact of cyber risks on the downstream industry include operations, financial, reputation, compliance, intellectual property and loss of life.

Those companies that are aware of, can mitigate and, in some cases, take advantage of these wildcards as it relates to their specific place in the industry will see their strength and brand in the market increase—even in a period of expected uncertainty.

by Mike Sobolewski
Michael Sobolewski is responsible for overseeing PwC’s tailored advisory solutions, assurance and tax services to contractors, home builders, building products companies, professional and support service companies, and governments, as well as private and public sector companies. He also serves as the Greater Michigan Private Company Services Leader. Mike’s career has been focused in the construction, automotive and manufacturing industries, primarily with businesses that offer diversified services such as general contractors, construction managers, subcontractors and government contractors. 

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