As many industries relied on digitalization and virtualization to adapt and survive the global pandemic, the vitality of on-site labor has massively restricted the architecture, engineering and construction industry.
Almost all construction activities faced major delays, and in some cases, projects have been terminated. Labor restrictions and travel constraints caused massive supply chain disruptions, and the uncertainty surrounding the future of construction ultimately led to extensive job losses.
The widespread of construction site shutdown impacts the subcontractor middle market the most. As more subcontracting firms experience bankruptcy, the middle market segment collapses which essentially means there will be a drain in the availability of skilled labor.
It will be extremely difficult for larger AEC firms to recover post- pandemic if the losses on the subcontractor middle market continue to progress aggressively. The unavailability of skilled labors in the future will lead to more delays, higher construction costs and more losses. Subcontractors will essentially be working less for more money. In order to prevent an upward ripple effect from the severity of losses in the middle market, larger AEC firms must proactively develop mitigation plans that entail the viability of subcontracts.
The losses in the AEC industry vary depending where you are positioned in the industry’s value chain. How the industry progresses in the long term highly depends on how the subcontractor middle market proceeds during the crisis in the short term. The sustainability of a healthy economy at the middle market level is vital for the overall recovery of the industry. The future of the industry remains uncertain, and uncertainty is construction’s worst enemy.
Blog post by Farah Al Saeed, Civil Engineer, Environmental Public Authority