News Archive
Booming industry feels inflation pressure
Released on 05/02/2008
One of the common concerns of the global construction industry is decreasing availability of essential resources and its counterpart of rising prices leading to inflated construction costs.
Another is the workforce crisis as leaders both in the United States and Europe make fresh efforts to identify sources of labour supply and ensure the safety of staff at the worksite.
This and other world-wide pressures on the industry are highlighted in McGraw Hill Construction’s ‘Smart Market’ report on key trends in the European and US construction market places.
The report is the outcome of collaboration between the American publishing company and the University of Reading’s School of Construction Management and Engineering, with the support of the Chartered Institute of Building.
Europe fortunately is in a new phase of expansion. The report says that the opening of previously closed national markets in Eastern Europe has already shown a marked impact on the European construction market place.
“According to ENR’s top international contractor’s survey, export volume from projects in Europe increased from US$46.66 billion (€31.69 billion) in 2004 to US$71.86 billion (€48.86 billion) in 2006,” the report says, drawing on figures compiled by the European Construction Industry Federation.
The number of international investors is also growing: in Europe in 2000, US$79 billion (€60 billion) was invested in commercial and retail properties; by 2006, this had grown to US$297 billion (€225 billion).
Commenting on the significance of this rate of growth, Roger Flanagan, professor of construction management at Reading University and CIOB past president, said: “It is exciting to consider the data and trends in the report and imagine how they will shape the way we do business.
“Ultimately, the business sense, entrepreneurship, innovation and imagination of leaders in our industry will decide how these trends shape our future.”
Describing the global construction market as a kaleidoscope of economies, the report points out that significant markets are emerging in other regions, with growth occurring in Africa, the Middle East, Latin America and Eastern Europe including Russia.
As the construction market place becomes ever more global, the report forecasts, the activities of these regions will be increasingly felt.
In the Middle East, the pressure on construction economics created by rising supply costs is being acutely felt. The Middle East Economic Digest (MEED) reports that the Gulf’s booming economy is making the region a prime target for an increasing number of international contractors.
The Gulf region, says MEED, currently has some $884 billion worth of projects in the planning or tendering stage. But there is a chronic shortage of resources.
Clients are said to be facing a shortage of contracting capacity and soaring material costs and wage rates. In 2007, the price of steel rose 70 per cent, cement by 50 per cent. The forecast for wages this year is an advance of around 20 per cent.
In this respect, the message of the McGraw Hill Construction report is conveyed in a one paragraph summary on resource scarcity and materials pricing, generating increasing inflation of construction costs around the world.
“As the construction market place becomes increasingly global in nature, pressure is growing. Firms need to be prepared to operate in a world of growing competition and decreasing resources. This marketplace requires new approaches to traditional challenges such as workforce, innovation and project procurement.”
Carol Jewell, research fellow at the University’s Innovative Construction Research Centre, contributed to the report’s section on innovation which describes the European Construction Technology Platform’s initiative to mobilise the region’s construction sector in finding a clear set of common priorities.
This also features FIATECH consortium’s emphasis on the deployment of technologies to improve design and maintenance of capital projects in the United States.
