Now that the new year is off and running, we want to help you take advantage of the opportunities — and overcome the challenges — facing the construction industry in 2022.
We’ve pulled together the latest market research and insights and learned this: while the market is facing shortages of skilled workers and building products, there’s a bright side. Revenues, hiring and spending on tools and equipment are expected to increase for significant numbers of construction contractors.
We also found that more automated technologies will be used to boost this industry’s operational efficiency.
This report dials you into these major trends and promising markets to help you grow your business and advance your career.
Let’s get to it.
Skills shortage intensifies
The skilled labor shortage plaguing the construction industry has only intensified over the past year. A new U.S. Commerce Department report revealed 62 percent of surveyed contractors are experiencing high levels of difficulty finding skilled workers (such as electricians and plumbers) — up from 42 percent a year ago.
The skills shortage is also felt within construction companies. A Deloitte survey of 500 engineering and construction (E&C) leaders said, “As the industry is creating new roles that are digitally oriented, companies are seeking data engineers, data scientists, coders, and developers. But attracting talent in these roles is a challenge as there is strong competition with technology companies.”
The Deloitte research notes these shortages have a ripple effect across construction companies.
“The impact of not filling job openings can negatively affect E&C firms in more ways than one including project delays and cancellations, projects being scaled back, inability to respond to market needs, losing project bids, and failing to innovate, among others.”
How the right technology can mitigate labor concerns
Given the fact that labor issues are expected to persist, how can contractors minimize the impacts to their business and try to overcome the issue altogether? In an article for Construction Executive, AvidXchange Vice President of Construction Jim Campbell explained how making timely payments to subcontractors could be the answer.
“Labor lives at the subcontractor level,” he wrote. “During a labor shortage, subcontractors can be more selective as to what work they do and when they do it. For a contractor to ensure their project leaps to the front of the line for a subcontractor, relationships are key. And timely payments make for a good relationship.”
So given the shortage of skilled labor, it will be important this year to make timely payments to strengthen your business relationships, attract more skilled workers, and bolster your chances of getting more of your construction work done on time and on budget.
AP automation helps attract and retain talent
You can deliver payment efficiencies by using AP software that automates and speeds up the invoice and payments approval process compared with the slow-moving, disorganized and error-prone nature of paper processes. By converting invoices and payments to digital formats, several initial steps associated with processing are eliminated.
AP automation can also help attract and retain talent because it reduces mundane work, freeing up employee time for more strategic work opportunities and increasing job satisfaction.
Supply chain issues, materials shortages persist
The construction industry’s shortage problems don’t end with skilled workers and contractors. The Commercial Construction report found there aren’t nearly enough building products compared to a year ago.
Ninety-five percent (a record high) of contractors are experiencing at least one product shortage—up from 71 percent a year ago.
There’s more—60 percent of contractors said their top concern related to the pandemic is the availability of building products. Specifically, in Q4 2021, 27 percent of contractors cited steel as their top product shortage, followed by roofing material (19 percent) and wood and lumber (17 percent).
Reasons for construction industry optimism in 2022
“The construction industry continues to face headwinds due to delays in starts of new construction projects, worker shortages and supply chain issues with material,” Campbell said in a recent edition of AvidXchange’s Middle Market Spending Report. “Still, spending on construction has the potential to increase over the coming months as the economy continues to rebound. There are especially promising opportunities for spending on major government-funded infrastructure projects and new residential homes.”
In the Commerce Department report we came across additional positive signs. For instance, 35 percent of construction contractors expect to grow revenues this year.
Those revenues, in turn, will likely generate more demand for invoice and payment processing. And companies that automate will be able to handle those higher volumes faster and more reliably than those who use manual methods.
Growth in digital and automation
There’s also likely to be plenty of growth in the construction industry’s use of digital and automated technologies. Deloitte’s report, “The Future of Construction,” notes the industry will likely integrate more digital technologies into workstreams to boost production and efficiency.
“These changes make it important for E&C firms to start thinking of how roles and jobs might change to reflect the use of these new technologies,” the report states. “For instance, many E&C firms are today looking to hire more data scientists and software developers than traditional engineers.”
This widespread digitization of the industry is poised to expand beyond design and assembly and into financial operations.
And there are outside positive influences, including infrastructure legislation, that offers you another new and potentially lucrative opportunity. The U.S. federal government passed the Infrastructure Investment and Jobs Act to spend $550 billion in new federal investments to upgrade America’s infrastructure during the next five years.
With more work comes more invoices and payments that are more efficiently handled via automation than paper.
Construction has always been a complicated world. The pandemic took that to another level. It’s had far-reaching impacts on the business of building homes, offices and other facilities along with all the financial transactions that entails.
There are definite challenges—especially the shortages. But there are also great opportunities to make 2022 a great year for your business and career. We think you’ll be well on your way to prosperity if you focus on running your construction company more efficiently. How? By automating your accounts payable (AP) processing and payments. The technology helps you lower processing costs and speed invoice approvals and payments.
It may also help when facing other skills shortages: external (subcontractors) and internal (engineers and finance department).