Construction
Overview
One Minute Read
Construction accounts for about 6% of global GDP, with revenues of $10 trillion. The industry is expected to grow across the medium-term as the world needs infrastructure development to drive global GDP growth. But it is the least productive industry in the world, with a highly fragmented ecosystem leading to major cost over runs, project delays and litigation. It is also the world’s largest consumer of raw materials and accounts for nearly 40% of total global carbon emissions. In response, the industry is transforming towards to a digital construction ecosystem, driven by five challenges and the widespread adoption of digital technology.
Industry Description
Construction is part of the wider Real Estate & Infrastructure industry, and is responsible for the process of designing, creating and sustaining the built environment.
Construction spans; the design & engineering of a built environment, the transformation from manufactured materials into a final constructed product, as well the creation of building materials from raw materials,
Construction accounts for about 6% of global GDP, with revenues of $10 trillion.
Drivers
Shaped by the global megatrends and now the pandemic, the industry is being shaped by five major drivers:
Demand - There is a global need to spend at least $57 trillion on infrastructure by 2030 just to keep up with global GDP growth, before spending on climate change. The pandemic hit demand in 2020 but this returned in 2021.
Skill Shortages – Construction employs 100m people globally but has an acute worker shortage. The lack of skills and talent shortages impacts productivity. It is also the least safe industry, although only accounting for 5% of the UK workforce, it has 36% of fatal injuries.
Sustainability – Buildings and construction accounted for 36% of final energy use and 39% of carbon dioxide (CO2) emissions in 2018. By 2050, new infrastructure and renovations will need to move to net zero embodied carbon, and all buildings must be net zero operational carbon.
Productivity – Construction has seen a meagre productivity growth of 1% annually for the past two decades. In a complex and highly fragmented ecosystem up to 35% of time is non-productive and only 50% of planned activities are on schedule.
Profitability – Profitability is low, at around 5% EBIT margin, despite high risks and many insolvencies. Customer satisfaction is hampered by regular time and budget overruns and lengthy claims procedures. Poor risk allocation between clients and contractors prevents projects from being procured and delivered successfully. Post pandemic costs are rising fast.
Transformation
The industry is under pressure to transform to a digital construction ecosystem to digitise processes, better exploit real-world data and improve sustainability.
The digital construction ecosystem leverages the real-world to inform design, manages the delivery process through digital tools and shared data, and utilises a connected and automated workforce to build using sustainable materials & methods to create a smart built environment that maximises operations and minimises the climate impact.
The COVID-19 pandemic has forced a rapid shift to digital interactions and remote working that is unlikely to change in the new normal.
Digitisation could reduce project costs by 45%.
Digital Technology
Digital transformation will drive needs for Business Applications to help automate key processes and manage information. Data Management to deal with a deluge of information caused by the growth of regulation and digitisation and Artificial Intelligence to help complement the human worker and drive efficiency
Cloud computing will be the infrastructure of choice to support innovation, flexibility and customer experience. A Digital Workplace to enable a newly remotely located workforce, whether on-site, at home or in offices and Networking & Communications to deliver a consistent and reliable experience.
Security, Compliance & Data Privacy is also critical not just for the design & build but into the long-term operational lifecycle of the infrastructure. Remote working, cloud and APIs all open up new attack surfaces and potential for security breaches. Finally, IT Governance & Management will be essential to manage the change and ensure value for money. Technologies such as blockchain may be key to digitising the construction ecosystem.