NZ’s civil construction industry facing a battle of skilled worker shortages and inflation

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The partnership between Civil Contractors New Zealand (CCNZ) and Teletrac Navman reveals the battle of worker skills, shortages, and cost escalations.

The sixth annual Construction Industry Survey, Teletrac Navman and Civil Contractors New Zealand (CCNZ), shed light on the industry outlook. While just over half of the respondents (52%) predict turnover growth in the next 12 months, the results indicate significant pressures and constraints impact most businesses. 

“The latest edition of the country’s bellwether survey of civil infrastructure construction companies illustrates the need for changes in government policy settings to improve productivity and cut through red tape,” says Civil Contractors New Zealand Chief Executive Alan Pollard.

“Businesses are under immense pressure to deliver the civil construction works the country needs. The industry is investing wherever it can to relieve some of these pressures, but much is out of our control and needs urgent government action. While some policy settings have been adjusted, more is needed to improve the outlook for this industry and its important work.”

Key actions include more funding and support for industry-specific training programmes at an entry-level, an industry-led approach to attract critical skills to the country, efforts to cut through the complex web of red tape for new migrants and their families, a crackdown on unfair contract terms and increased productivity initiatives to balance out a time of high inflation.” says Mr Pollard.

While many businesses remained confident in their ability to withstand and overcome challenges, the overall industry outlook and the government’s commitment to infrastructure have fallen since the previous survey in 2021.

The country has a critical need for new and upgraded infrastructure, with a combined infrastructure gap at a whopping $210 billion, so many essential large-scale projects to improve the quality of life for Kiwis on the horizon may be at stake, he says.

Technology to meet the needs of the population now and in the future

The survey finds more productivity gains are possible through technology, with usage and uptake of new technologies remaining largely consistent with 2021. 

Fuel management and business intelligence are key areas where technology could be exploited more, says Jim French, Construction Industry Specialist at Teletrac Navman.

“When it comes to efficiently building and maintaining New Zealand’s infrastructure, businesses haven’t explored technologies’ full capacity for maximised productivity. Since the demand for large construction projects will only intensify, it’s crucial that businesses increasingly embrace technology for productivity benefits. 

“This doesn’t necessarily mean they need to invest in new technology; they will almost certainly be able to use existing systems better. Many businesses use only a fraction of the functionality in the solutions they pay for. Greater use of technology can help improve safety and compliance, streamline projects and anticipate rather than react, particularly while the industry is operating with constrained resources.”

The major challenges facing NZ’s civil construction industry

More project certainty: The findings suggest contractors also need greater confidence in future projects being planned, with 71% of businesses surveyed expecting the development of a more apparent pipeline of central and local government work could have a positive impact. 

Skills and worker shortage

Attracting, training and retaining skilled people remains the industry’s greatest challenge. 84% of polled indicated skill shortages were one of the main challenges in increasing capacity to meet the country’s future infrastructure needs. In comparison, 87% would hire today if the right skills were available. 

When combined with a tight labour market, low unemployment, and severe immigration constraints, the civil construction industry talent shortage means contractors face extreme difficulties in ramping up worker numbers to respond to client requests for increased capacity.

As a result of intensified skill shortages, businesses are stepping up with more measures to attract and retain workers by placing incentives and increasing pay to flexible hours. In particular, there has been a distinct jump in companies offering employees competitive salaries (92%), followed by flexible hours (38%). 

The results further confirm that immigration policy is an important channel to address this gap along with education and training. 59% of contractors surveyed believe the ability to employ migrant workers to supplement the domestic workforce in critical areas of skills shortages under more flexible visas and accreditations will positively impact the workforce. 

Cost escalation and supply chain issues

Fluctuating costs and inflation, coupled with supply chain issues, are reverberating through the industry, with 90% of contractors reporting these issues have heavily impacted them. 

As a result of cost escalation and supply issues, contractors have to re-negotiate with clients or scramble to find alternative sources of materials and equipment. This adds pressure on the client-contractor relationship, raises project costs and sometimes extends construction times.

This year’s survey shows a sharp rise in these challenges in the list of concerns. 67% polled feel fluctuating costs are major barriers to future growth, a considerable upgrade from 45% in 2021 and 15% in 2020. 

Complex contract terms and negotiations: Increasingly complex contract terms and negotiations also emerged as a new issue. Although around two-thirds of businesses (65%) have been asked to increase their capacity to take on work, 62% declined a tender or did not bid for work due to unsuitable contract terms. Without action, the outcomes that New Zealand needs from infrastructure may be at serious risk.

The 2022 Construction Industry Survey is available for download here.

2022 Construction Industry Survey Key Findings

Key industry issues

  • 71% want a more apparent pipeline of central and local government work
  • 59% think that the ability to employ migrant workers under new visas and accreditations will have a positive impact on the industry
  • 67% feel fluctuating costs are a challenge for future growth, a significant rise from 45% in 2021 and 15% in 2020

Industry outlook/confidence

  • 90% have been significantly impacted by cost escalation and supply chain issues
  • 41% are confident in the outlook for the construction industry
  • 52% are predicting turnover growth in the next year

Workforce

  • 84% say a skills shortage is a challenge to industry growth
  • 87% would hire today if the right skills were available
  • 79% have staff working on a nationally recognised qualification or apprenticeship

Technology and procurement

  • 23% were required to use specific technology to bid for client work (e.g., GPS & BIM)
  • clients have asked 65% to increase their capacity to take on work
  • 62% refused a tender or did not bid for work due to unsuitable contract terms

Survey methodology

The 2022 Construction Industry Survey is an online survey that polled 226 civil construction professionals representing a range of roles, business sizes and regions across New Zealand from 16 May to 2 June 2022. All survey respondents were stakeholders in various businesses working to construct Kiwi roads, water and energy networks, broadband and other infrastructure networks. The survey was commissioned by Teletrac Navman and Civil Contractors New Zealand and produced by research firm Kantar (formerly Colmar Brunton). The margin of error for the sample is + or – 6.5% at a 95% confidence level.

Source: Civil Contractors New Zealand Incorporated 

Image Source: Civil Contractors New Zealand Incorporated

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