Critical labour shortages plus escalating materials costs are a spanner in the works for Australian construction businesses. In the year to September 2021, residential construction costs increased 7.1%, the steepest rise since 2005, and are tipped to jump a further 6% this year. This has all been underpinned by the worst materials shortage, and greatest demand for workers of any sector, in more than four decades.
How can your business overcome these largely pandemic-induced crises?
Why the scarcity?
The reasons for the skills and material scarcity are primarily due to the pandemic’s direct and indirect effects. These include border closures, a backlog due to production shutdowns, customs delays, and infections in the workforce.
Raw material prices such as timber and iron ore prices hit record highs, affecting final products, particularly steel. The bushfires of 2019-20, and the heavy rain and flash flooding that has been experienced across Australia, have exacerbated the situation. Available stock became unsalvageable as commercial plantations were destroyed.
Add to the mix, governments in Australia and overseas investing in infrastructure and construction to build their way out of the crisis, creating even more strains on supplies.
Human capital at a premium
These projects, such as for bridges, roads and railways, could be a risk due to the “worst skills shortages in decades”. Worker shortage is expected to be at 105,000 by next year, with project managers struggling to fill one in three vacancies. The trades in highest demand are plumbers, electricians, labourers, bricklayers, and plasterers.
Construction outlook for 2022
The construction sector is expected to grow 2.4% annually over the next five years, making it one of the top four growth sectors, with wages forecast to increase by 6% because of the growing skills shortage
To create their own talent pipeline, Australian construction businesses are renewing their focus on taking on more trainees and apprentices. Firms are also casting the recruitment net wide to ensure a more diverse workforce, including dealing with the sectors’ poor record of attracting women.
Strategies to mitigate supply chain disruption
Even before the pandemic, contract overruns for time and budget were commonplace, so chances are you just negotiated for more wriggle room. It may be worth communicating even earlier to find compromises about project timelines.
While you may not have much control over the materials shortage and skills shortage, having strategies in place will allow you to better manage the risks and take a long-range view to sure up your systems for greater business resilience. That may be the mindset to learning to operate with the current crisis and beyond.
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