The importance of the construction industry to the global economy can never be underestimated. Most estimates put its contribution to global GDP at between 11 and 13 percent, whilst construction employs more than 100m people worldwide, around 10 percent of whom are based in Europe.
Of course, it’s also an industry that is especially vulnerable to national and international trends. The pandemic brought huge swathes of construction to a standstill, and the pace of recovery has varied between regions. After some decidedly positive forecasts for 2023, many observers and research groups ended up downgrading their expectations as that year drew to a close. As to 2024, most sources agree with the sentiments of the Royal Institute of Chartered Surveyors, whose Q2 Global Construction Monitor said results “continue to point to a modest expansion in industry activity”.
But whilst this might not be an imminent cause for alarm in itself, there are several emerging trends that could spell trouble ahead, including for pro AV, where the delay or even cancellation of projects could have huge consequences for new tenders.
SKILLS & SUSTAINABILITY
The first of these challenges is the growing shortfall in the number of skilled construction workers. This appears to be especially apparent in some more mature markets, such as the UK, where YouGov recently reported that 74 percent of construction workers think that labour and skills shortages will present critical issues in the industry. Published in November 2024, the Feedback from the Field: Time for Change report, commissioned by global technology company SafetyCulture, also revealed concerns about an exodus of skilled workers from the UK, a failure to invest sufficiently in the latest tools and IT, and significant deficiencies in knowledge-sharing.
Putting the situation into even sharper focus, Essential Site Skills, a specialist in construction training, recently reported that 83 percent of UK construction companies are struggling to recruit workers, noting: “This shortage has been driven by a combination of factors, including an ageing workforce, a decline in young entrants, and post-Brexit restrictions on skilled foreign labour.”
Secondly, and arguably even more importantly, is the fact that the industry is going through a seismic change in methodology and materials. The Construction Industry Council reports that the built environment and construction sector accounts for 38 percent of global carbon emissions, and it has been estimated that globally a new city equivalent to the size of Paris is built every week.
Therefore, it is evident that there is no hope of achieving the net zero goals – which, tragically, seem even more unreachable with every passing month – without the ongoing rapid transition of the construction industry to sustainable materials, increased energy efficiency, circular economic principles and environmental awareness.
The most recent World Green Building Trends report indicated that the willingness to integrate green practices is actually pretty strong. Quite how much this is translating into action is difficult to determine, although Construction News recently reported on NBS research that suggested “tough finances and a lack of data are holding back further progress”.
ISG COLLAPSE
An indication of quite how constricted those financial circumstances might be for parts of the building industry came in September, when – in a shocking development for most in the sector – the UK arm of international construction giant ISG collapsed into administration. Chief executive Zoe Price highlighted the impact of “large loss-making contracts secured between 2018 and 2020” on the company, whose private sector clients included Apple, Barclays and Google.
Some 2,200 workers lost their jobs with immediate effect, but in reality the employment implications reach far beyond ISG – not least due to the fact that the company held more than $1bn worth of government contracts. It’s inevitable that businesses down the supply chain, including AV vendors and integrators, will feel an impact. Moreover, there will also be consequences for the tendering of projects that would have taken place, but will now likely be much delayed.
Simon Watson is global head of innovation at the AV and UCC integrator Kinly. He says that many companies in AV are feeling nervous about the construction industry and how its current fluctuations might play out over the next few years, although he emphasises that Kinly’s own project schedule for 2025 is looking healthy.
“If you look at what happened recently with ISG, that was a company that had massive government contracts, as well as high-profile corporate projects across the UK,” says Watson. “These construction firms operate on fine margins to deliver world-class projects, which leaves little room for market disruption.”
Therefore, he currently detects a jittery feeling about what all this might mean for pro AV. Most AV companies, he contends, will have noticed the disruption in the tender market. He suggests that more companies, including Kinly, are likely to look to offset any future reduction in new tenders by further strengthening their service and post-maintenance aftercare offerings.
Nonetheless, Watson remains positive despite the market challenges and the increasingly unstable and unpredictable geopolitical situation. “It’s looking really positive for us and a lot of other companies as we move into the new year. In the UK it’s a pretty small industry and we all know each other, so it is possible to get a sense of how everyone is feeling,” he adds.
So it seems there are actually reasonable grounds for optimism at least about the short-to-mid-term future. However, with the global economic and political outlook becoming ever more uncertain and subject to dramatic change, it makes more sense than ever to take the long-term view and build in contingencies to adjust to sudden shifts in the market. In the case of pro AV, this awareness is leading, logically enough, to renewed thoughts about diversification and additional market offerings.
