One of the most significant sectors in major economies across the globe is the construction industry. In the United States of America alone, structures estimated to be worth $1.4 trillion are built every year. Over seven million employees work in this industry in over 700,000 construction businesses.
Since the beginning of this year, professionals working in the construction industry have encountered many challenges, with some of them evolving. They even expect to encounter these and other challenges this year and beyond.
While there have been measures taken by governments especially during and after the COVID-19 pandemic to cushion small businesses, we might not see such measures again. Here are challenges facing small construction businesses in 2022 and beyond;
Supply Chain Disruptions — Affecting 70% of All Small Businesses
According to a small business report from 2021, over 66% of small businesses reported negative impacts due to the COVID-19 pandemic. This was even harder on small construction businesses and has extended to 2022.
Even though 2022 has not witnessed the same challenges with pricing as 2021, small construction companies are still struggling to get some construction materials. Sourcing has become more difficult, especially because of construction material stockpiling.
This has led to supply chain disruptions. Large construction companies are keeping materials in warehouses, making it difficult for their small counterparts to get these materials. This problem is expected in the next few years, something that makes the industry challenging for small businesses.
Shortage of Skilled Labor
Even with the supply chain disruptions discussed above, the construction industry has been growing over the last few years. The industry depends highly on manual labor despite the advancement in technology and its adoption.
Most economies have an aging workforce that slows down economic growth. This is making it difficult for small construction businesses to recruit new and skilled workers as the industry grows. They are not able to meet the growing demand, something that hurts their productivity.
In addition, the young generation does not like construction jobs. They are looking at other career opportunities since construction jobs are not lucrative. However, construction businesses can introduce training programs targeting young people to try and solve this problem.
Technology Adoption
Technology advancement has transformed every other industry today. The construction industry has not been left behind. Construction businesses, especially the small ones that are not able to adopt new innovations risk running out of business.
Technology is playing an important role in running operations and completing projects and construction businesses should look to proven tech to weather difficult times.
Estimation technologies, IoT, wearables, mobile, cloud-based software, standalone applications, and construction equipment are some of the innovations driving the industry today. Unfortunately, small construction companies lack enough capital to invest in these technologies, something that might affect their productivity going forward.
Cost of Raw Materials
Land and construction materials are among the most important things for every construction business. However, the cost of land and construction materials has been rising in the past few months. The cost is expected to even grow further beyond 2022.
Small construction companies take the risk when it comes to cost changes because of speculative home construction and fixed-price contracts. As the prices of raw materials and land change, small businesses are left with less leverage.
This affects their operations, minimizing their profit margin. With minimal profits, these businesses are going to find it difficult to compete with large construction businesses. This is making it challenging for them to survive now and beyond.
Weather
We are living in a world with changing weather. For instance, construction businesses in the United States had a busy 2021 caused by hurricanes. The southern part of the country recorded the highest rainfall in years as well.
Researchers had even said that 2022 was going to be worse especially with hurricanes, with between two and five major hurricanes, six to eleven small hurricanes, and about fifteen storms.
With growing concerns due to global warming, this is expected to keep on changing every year and might get even worse in the years to come. With such busy seasons, small construction businesses are not going to complete their construction projects on time. This does not affect the US alone, meaning that small construction companies will be hurt by bad weather the world over.
Even through these challenges, the construction industry is expected to keep on growing this year and beyond. This means that construction businesses that implement proper risk mitigation strategies will witness positive growth.
