The Good, The Bad and the Struggle: 2022 Construction Industry Outlook

As the global pandemic begins to recede into the background, the big story of 2022 will be shortages: Shortage of materials, shortage of workers, and possibly even shortage of insurance coverage.

Yet the construction industry has reason for optimism. With the red-hot North American construction market continuing to set records, shortages won’t hold it back completely. It requires resilience to manage supply chain risk and labour shortages, and construction organizations that manage those well will certainly achieve success.

Trends to watch for in 2022

  1. An improvement in recruiting

By 2030, the average Canadian construction worker will be 42 years old, and young people aren’t exactly lining up to work in construction.[1] To meet demand, the industry needs to recruit more than 300,000 construction workers; one report estimates the industry could be short 81,000 workers by 2030.[2]

The reality is that construction work is tough. And with an average annual wage of less than $60,000, the industry just isn’t attractive to younger workers. Some provinces and organizations have created paid apprenticeship training programs, but it hasn’t been enough.

The good news is that new trends in technology – such as drones, robotics and digital tools – appeal to younger workers. And for those who prefer not to work outside, the increase in modular construction may be a good option.

At the same time, entry-level wages will likely increase because younger workers bring technology skills that older construction workers might lack.[3] In addition, a greater number of construction companies are now offering voluntary employee benefits, which also attracts that younger demographic. All of these will go a long way toward recruiting new workers into the industry.

  1. Stopped up supply chains

It’s an all-too-common story: A contractor is missing lumber or copper or windows that were ordered months ago. Materials shortages have kept more than one contractor from completing jobs on time and on budget this year. According to one survey, more than 90 per cent of builders said there were shortages of appliances and lumber, while 90 per cent had shortages of plywood and 87 per cent said they had shortages of windows and doors.[4]

Materials shortages interrupt cash flow, affecting costs, timing and budgets. Contractors are lucky if they can overpay for materials and stockpile. Supply-related project delays have contractors scrambling to extend expiring builders’ risk policies.

And while supply chains were behind this year due to natural disasters and the delta variant of the virus,[5] these disruptions are expected to continue into 2022. The key to mitigating supply chain issues comes down to resilience: engagement with suppliers, creating materials reserves and developing backup suppliers. It’s also important to reconsider reliance on foreign-made supplies and just-in-time materials sourcing, making it important to establish local and regional suppliers when possible.

  1. Growth in alternative materials

Eco-friendly building materials used to be reserved for clients trying to prove a point, but no longer. Today, the quality of alternative materials rivals – or even surpasses – that of traditional materials. Consider cross-laminated timber, also known as “mass timber.” Though it won’t solve the supply chain issues on its own, the strength and improved fire resistance of mass timber make it a viable alternative in some cases.

Another example is “bendable” concrete, a concrete mixture with fibre reinforcement. The fibres create concrete with greater flexibility and durability than traditional concrete, reducing the need for costly repairs.

Unfortunately, alternative materials may be more expensive than traditional ones, and there may be insurance implications, including the effect on property, general and product liability coverage. Contractors should check with their brokers to help determine whether the extra cost is worth the investment.

  1. Increased technology use

As in other industries, the unstoppable march of technology continues in the construction industry. There’s a lot at stake: Technology stands to improve the industry’s productivity as much as 60 per cent, delivering as much as $1.6 trillion annually in incremental value.[6]

For construction companies, technology means drones,[7] construction robots and self-driving vehicles. Industrial 3-D printing is becoming a reality. Of course, project management tools improve scheduling and budgeting concerns.

Unfortunately, with technology comes cybercrime. And construction may be harder hit than other industries, with three-fourths of construction-related firms experiencing a cyber incident in the last year.[8] As a result, cyber insurance premiums will increase 20 per cent or more in 2022, as underwriters introduce more stringent guidelines than ever before. Yet with cyber incidents increasing in both frequency and severity, cyber insurance is no longer optional. It’s too expensive to skip coverage.

The Last Word

The construction industry is well positioned for 2022, but challenges still abound. Organizations that can plan their way around the uncertainties are better positioned to manage their risks and come out on top.

The best way to counter the risks and increase resilience is by working with a broker. Equipped with knowledge and experience of the construction industry and its insurance players, the right broker can help secure the right insurance in the right amounts at the lowest cost.

Doug Lyall is Chief Sales Officer and Vice President at global construction insurance brokerage Hub International.

[1]BuildForce Canada, “Construction and Maintenance Looking Forward: National Summary,” March 2021. [2]Canada Immigration News, As Canada’s Economy Rebounds, Construction Industry Needs Hundreds of Thousands of Workers,” June 18, 2021. [3]ConstructConnect, “Using Construction Tech to Attract Younger Workers,” April 5, 2019. [4]Wall Street Journal, “Builders Hunt for Alternatives to Materials in Short Supply,” October 6, 2021. [5]Ontario Construction News, “Construction supply chain shortage still causing major problems,” September 29, 2021. [6]McKinsey, “The next normal in construction,” June 2020.[7]ConstructConnect Daily Commercial News, “Inside Innovation: Drone usage set to take off in 2021,” May 12, 2021. [8]Forrester, “Cybersecurity Trends,” September 13, 2021.

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