What Trends Could Your Construction Business Face for the Rest of 2023?

Doing business in the modern world demands that construction companies stay ahead of a shifting marketplace. As we navigate through the remainder of the year, several overarching trends shape the construction industry. Chances are, you've already experienced the impact of some of them on your projects. Let's dive into these key trends reshaping the construction landscape.

The Rising Tide of Costs

Inflation is a term used to describe the general price increase over time. While it eased off from its peak in 2022, inflation remains a significant concern this year. In July, the cost of goods and services was 3.2% higher than the previous year, although this was lower than the anticipated 4.7%. While these percentages may seem small, they have real effects on budgets and costs.

For construction companies, inflation poses unique challenges. A significant issue revolves around the rising costs of materials. When the prices of materials soar, accurately estimating project costs becomes increasingly tough. This can lead to unexpected budget overruns. Furthermore, disruptions in supply chains are causing delays in obtaining essential materials, adding to project complexities.

Inflation's impact doesn't stop at materials. It extends to labor costs as well. Workers often seek higher wages to keep up with the rising cost of living. This adds another layer of complexity to managing construction expenses.

Navigating the Unforeseen

While not new, catastrophic risk is becoming more intricate and harder to predict.

Construction professionals must prioritize disaster preparedness. Disasters can make construction sites even more hazardous. Construction companies must have plans to ensure worker safety during emergencies.

Weather-induced delays are a common headache in construction. Roughly 45% of construction projects worldwide experience delays yearly due to bad weather. These delays translate to increased costs and lost revenue.

Moreover, disasters can disrupt supply chains, causing ripple effects. Imagine a hurricane striking a factory that produces vital materials for your construction project. Such incidents, whether nearby or far away, underscore the interconnectedness of our world and its potential to impact the construction industry.

Understanding Legal Complexities

Legal challenges have always been a concern for businesses, but recent litigation trends have heightened these concerns for construction companies.

One particular trend is the rise of nuclear verdicts. These are monumental lawsuit wins where companies must pay more than $10 million in damages. In 2022, more than 15% of these verdicts were related to accidents or issues on construction sites.

The repercussions of nuclear verdicts extend beyond immediate financial strain. When a company faces exorbitant lawsuit payouts, it can jeopardize its financial stability. Additionally, insurance companies might respond by raising rates and becoming more selective about the businesses they insure. This dynamic makes obtaining insurance coverage more challenging and costly for construction companies.

One factor contributing to the surge in massive verdicts is the growth of litigation finance. This involves third parties funding plaintiffs' lawsuits, amplifying the financial stakes. Policymakers are beginning to address this trend, weighing regulations on litigation funding.

Facing These Trends Together

Each of these trends has the potential to impact your construction business significantly. Yet, you can navigate these challenges effectively with the right partner and strategies.

One way to tackle these challenges is collaborating with specialists such as Marsh McLennan Agency. Our expertise can help you develop a strategic plan tailored to your short- and long-term objectives. We offer a range of options, alternatives and advice to guide you in effectively managing risks.

The construction industry continues to evolve, and understanding these trends is pivotal to success. Inflation's impact, catastrophic risks and legal complexities influence the construction landscape. By teaming up with professionals and adopting proactive strategies, you can ensure your construction company remains adaptable and resilient in the face of these evolving challenges.

To dive deeper into these topics, download and read the Marsh McLennan Agency Business Insurance Trends Report. To learn more about how we can assist your company, reach out to a Marsh McLennan Agency construction colleague today.