The building and construction industry continues to be buffeted by many challenges which show no sign of abating.

Master Builders Queensland has undertaken a survey in order to gain a better understanding of the nature of these challenges, how they expect to change going forward and how contractors are responding in their business practices.

Current Threats

Cost increases in both materials and labour continue as the largest threats to construction business.  Delays in being able to secure labour and regulation are also causing concern.

The extensive wet weather was also raised as a threat in further blowing out construction programs, further threatening cashflow.

All the negative publicity around builders as well as unrealistic expectations from clients and the QBCC is also placing extreme pressure on the industry.

Looking forward

There is no sign of material prices increases stabilising any time soon. The largest number of respondents (35%) expect there to be no relief before late 2023. It is the same for trades and labour
price increases. There was a general concern that the lack of skilled apprentices coming through will drive up prices even further.

Many respondents were also concerned by impending changes to the National Construction Code (NCC) to including accessible housing and raise the bar on energy efficiency.

Strategies for responding

The majority (65%) of respondents are negotiating with their clients on fixed price contracts for increased payments. For the most part clients are agreeing to the payments (59%), with one trading commenting “our clients have been understanding, but not happy”.

Other strategies builders are using to tackle the price hikes include:

  • Clauses in contracts such as provisional sums and special conditions
  • Moving to a cost plus contract
  • Prioritising high risk items which need to be procured immediately (with possibility of early delivery, storage and unfixed goods payments)
  • Reviewing all pricing prior to site start and then review, increase or terminate contracts

Business going forward

One in three reported that the increased challenges are leading them to consider closing their business within the next 12 months. Many who intend to remain do so because they can see no
other option.

Those who intend to stay see an opportunity in diversifying, reducing the work they take on or the nature of the work.

Reference: https://www.mbqld.com.au/__data/assets/pdf_file/0029/222698/Hot-Topic_Sept-2022.pdf