Engineering and Construction Industry Poised for Growth, But Persistent Challenges Cast a Shadow

A majority of the engineering and construction (E&C) industry remains cautiously optimistic despite widespread economic and geopolitical uncertainty, according to KPMG’s 2023 Global Construction Survey.

The new report includes industry perspectives from more than 250 E&C professionals globally, as well as project managers from a variety of industries. The study analyzes the growth potential and challenges facing the E&C industry, the rising influence of environmental, social, governance (ESG) initiatives and the role of new, innovative technology in the construction landscape.

“With more and more employees looking for companies that prioritize DEI and employee health and wellbeing, amongst other factors, companies will need to offer fulfilling careers with flexible working conditions, greater work-life balance and varied career paths alongside cutting edge innovation in purposeful, sustainable organizations in order to succeed in an ever-changing, competitive industry,” said Geno Armstrong, International Sector Leader – Engineering & Construction, KPMG International.

The stars are aligned

As the global E&C industry continues to face a volatile environment, with sustained supply chain disruption, rising inflation of energy, materials and wages, labor shortages and a possible recession, 66% of respondents are optimistic about the direction of the construction industry. The industry is poised for outsized growth due to infrastructure demand, government stimulus, energy transition and new post-covid customer demands.

• Four out of ten E&C respondents expect revenue growth of more than 10% in the next 12 months.
• 78% believe infrastructure stimuli will have a positive impact.
• E&C firms remain more cautious than project owners, but only 7% express pessimism about the future state of the market – the corresponding figure for 2021 was 29%.

Cracking the code – project performance

Despite the confidence expressed by respondents, the industry still needs to solve the productivity and performance issues that have plagued the industry for decades and continues to face a number of challenges, in the form of continued supply chain disruption, high energy and materials prices, and labor shortages that are further pushing up costs and holding up projects.

• 45% of project owner respondents say they have experienced a pandemic-related schedule delay or cost impact of more than 20%.
• 37% say that they have missed budget and/or schedule performance targets due to lack of effective risk management and that only half of project owners’ projects are meeting completion deadlines.
• 36% of respondents are placing greater emphasis on accurate risk reporting (up from 25% in 2021) and establishing a dedicated risk management department (20%, up from 17%).

• 54% say they fully envisage the benefits of ESG investments and are making improvements in this area. 50 % of E&C companies see the opportunity to gain a competitive edge through investing in ESG initiatives, suggesting that leaders are beginning to grasp the value of embracing ESG more fully.
• 32% of project owners recognize the need to integrate ESG into both their projects and reporting to enhance access to capital to fund their projects.
• Project owners and E&C firms have differing views on the most crucial aspects of ESG, with project owners feeling that reducing greenhouse gas outputs and developing renewable facilities as the most important, while contractors are more concerned with social considerations such as Diversity, Equity and Inclusion (DEI) and meeting government requirements.

The stage is set for continued innovation

The construction industry is starting to embrace the power of technology to transform performance. The adoption of innovative technologies such as robotic process automation (RPA), virtual reality (VR), project management information systems (PMIS), drones, smart sensors and artificial intelligence (AI) has increased significantly. When it comes to improving ROI on capability projects, PMIS, building information modeling (BIM) and advanced data analytics are considered to have the greatest potential; digital twins, modular/offsite manufacturing, AI, and BIM are driving the greatest gains in project performance.

• 81% of E&C firms say they are adopting mobile platforms, 43% use RPA and 40% are adopting AI—although many are in the early stages.
• However, a smaller proportion of the respondents’ companies are applying these technologies across all projects, creating a lack of consistency in standards across the industry.
• A vast majority of respondents say prefabrication is an important solution for capability projects, although just one-quarter of E&C companies use modular manufacturing across all projects.

For more insight, check out the full 2023 Global Construction Survey.

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