What are the biggest challenges and opportunities facing the construction sector in your jurisdiction?
The biggest challenges facing the construction sector in Norway today are several. The most important are nevertheless to combat labour crime, improve communication flow in the projects, reduce the number of disputes, get small contractors to adapt to larger projects, and cooperation and competition with foreign contractors. The use of new types of contracts will be more prominent in the coming years, which can also pose challenges.
There are also big opportunities in the years to come. For example, several of the contracts entered into today are on a larger scale, which contributes, among other things, to increased security for workers and a high creation of value in society. Furthermore, we see that new types of contracts that allow for greater involvement of contractors, such as optimised solutions developed by the contractor, can open up for new opportunities.
In addition to this, and mainly as a result of the latter, there will be fewer disputes related to the design and planning in the design and build contracts, which is a positive development for the employer.
The construction costs in Sweden are among the highest in the world. This is due to high salaries for construction workers, high taxes and high costs for construction material. At the same time, the quality requirements under Swedish building regulations are among the highest in the world. Sweden has seen a great population growth and urbanisation in recent years and there is a severe shortage of housing, especially in the larger cities. To build affordable housing is a great challenge and will continue to be so for many years.
Despite being a highly developed economy, there still are an unacceptable number of deaths and injuries in the construction industry in Hong Kong. During the construction of the Hong Kong-Zhuhai-Macau Bridge, for example, 10 workers have lost their lives and a further 600 others have been injured. This has prompted calls for more strict punishment for companies that contravene safety regulations.
Cash flow remains a significant challenge in Hong Kong. “Pay when paid” clauses remain common in construction contracts. A 2011 government survey found that 45% of main contractors and 57% of subcontractors experienced serious delays in receiving payment, and there is little to indicate that the situation has improved markedly. Although the proposed introduction of SOPL may help to alleviate this difficulty, there has not been significant legislative attention given to this issue since a public consultation in 2015.
The number of significant infrastructure projects underway in Hong Kong, paired with restrictions on the use of non-Hong Kong workers, has led to labour shortages in the construction industry, driving wages and construction costs higher. This is compounded by a skills shortage and an ageing workforce (with an estimated 40% of construction workers being over 50). Managing these shortages is likely to be a substantial challenge for the construction industry in the coming years.
The UK faces a challenging macroeconomic climate, with low levels of growth and productivity. This has contributed to a rise in insolvencies in the construction industry, most notably Carillion (one of the largest UK contractors), whose insolvency has caused major problems for a number of government projects, facilities management contracts, and subcontractors in its supply chain.
The consequences of Brexit on the industry are still something of an unknown, but there is a risk that it could contribute to labour shortages, higher material costs and reduced foreign investment in infrastructure. Much will depend on the UK’s trading relationship with the EU post-Brexit.
Having said that, the fall in sterling has (in the short term at least) made the UK an increasingly attractive foreign investment opportunity.
There are opportunities for investment in emerging sectors like renewable energy and for efficiencies arising out of the use of new technologies and more collaborative ways of working.
The biggest challenge to the construction industry in the United States continues to be a shortage of skilled labor. During the last economic downturn, the construction industry in the United State shed a substantial number of jobs. As recovery has continued, those workers have not returned to the industry. In fact, the Associated General Contractors found in a recent survey that 75% of firms expect to add additional skilled labor in 2018, but that 78% of firms are having a difficult time locating qualified employees. See Seventy-Five Percent of Construction Firms Plan to Expand Headcount in 2018, Contractors are Optimistic About Strong Economy, Tax & Regulatory Cuts, January 3, 2018 (available at https://www.agc.org/news/2018/01/03/seventy-five-percent-construction-firms-plan-expand-headcount-2018-contractors-are-0). In addition, the construction labor force in the United States is aging out, and younger workers are not filling those vacancies.
There are, however, many reasons to be optimistic about the U.S. construction industry in the coming years. The U.S. economy continues its strong growth, and recent changes to U.S. Tax law should spur additional growth. In addition, the Trump Administration continues its effort to roll back regulations, making construction in sectors such as energy easier to commence. The Trump Administration is also anticipated to announce an infrastructure plan that is expected to provide a major influx of federal money into domestic infrastructure projects.
Lack of financing and rather often the disrespect of the applicable laws, which leads to litigation, instead of conducting business without problems.