Construction Predictions 2020
We are launching our Construction Predictions 2020 campaign, aimed at sharing trends and insights within the Real Estate sector on a weekly basis. Seven Deloitte Firms have cooperated to create this collection. Every week we will publish a new prediction, discussing subjects from ‘Data Analytics in Construction’ to ‘Governance and controls for large infrastructure projects’.
Prediction 1: The Age of With… AI in construction and infrastructure. Creating value through data
Global demand for infrastructure is expected to continue growing over the next 30 years (only 25% of the infrastructure required for 2050 exists today). However, the Construction and Infrastructure (C&I) industry is facing major structural issues that have eroded margins (the EBIT-to-sales ratio stands at just 3% at European companies) and increased project risks.
Prediction 2: Governance and controls for large infrastructure projects
It is an exciting time for the infrastructure community. The Global Infrastructure Hub, a G20 initiative, calculates that the infrastructure spend across the 56 countries that it monitors will increase from USD 2.7 trillion today to USD 3.3 trillion in 10 years’ time. However, large projects often fail to achieve their stated objectives, especially their CAPEX budget. Project owners tend to use a disparate set of processes and tools to try to manage their projects in order to improve control and governance but often fall short as the solutions chosen lack integration or appropriate consideration to be able to add value to the project’s particular circumstances.
Prediction 4: Modern Methods of Construction
The world is on the brink of a technological transformation; one that will disrupt the way we all live our lives, the way we work, and the way we interact. The World Economic Forum has, for a few years now, described this upcoming event as the ‘Fourth Industrial Revolution’, and has characterized it as a ’fusion of technologies that is blurring the lines between the physical, digital, and biological spheres. Multiple industries are continuing to enter this exciting new era, transforming the way they work with the support of new digital technologies and automation, and innovative organizational structures.
Prediction 5: Dawn of a new era. Digital and advanced technologies are reshaping the E&C sector
Technology is having an unprecedented impact on the E&C industry—from robots to connected job sites, the industry is seeing an incredible array of digital technologies that are transforming how E&C firms operate. These inherently disruptive digital and advanced technologies have the potential to provide greater efficiency, productivity, as well as safety breakthroughs the industry has sought for decades.
Prediction 6: The impact of digital transformation on construction companies’ diversified strategy
The construction industry globally operates in a highly competitive environment, with narrow EBITDA margins. Unexpected events, such as the current COVID-19 crisis, present additional challenges. Engineering and Construction (E&C) companies have been diversifying their business portfolios. The motivations behind this are common to all sectors and consist of growth, synergies, reduced risk and cash flow recurrence and stability.
Prediction 7: The Engineering and construction multinational enterprises: The future of taxation under the OECD’s Pillars One and Two
The international tax landscape will change dramatically in the near future. The Organization for Economic Co-operation and Development (OECD) G20 Inclusive Framework (IF) on Base erosion and profit shifting (BEPS), formed by over 135 countries, is currently agreeing on how taxing rights on income generated from cross-border activities in the digital age should be allocated among jurisdictions. Measures to be agreed upon by the IF will represent a substantial renovation of key international tax rules, such as the physical nexus concept, which were designed more than a century ago. The new international tax rules will impact most economic sectors, including to a certain extent, engineering and construction multinational enterprises (E&C MNEs), affecting not only highly digitalized businesses.
Prediction 8: Digital Construction: incorporating digital technologies into the construction industry
The construction industry impacts all of our lives daily. Without it, there would be no roads, offices, hospitals, schools, and perhaps most importantly, homes. The industry represents the building blocks of our communities and, from a wider point of view, is a cornerstone of the economy.
Prediction 9: Standardization and Process Automation: Key Aspects for Cost Efficiency in Construction
In recent years, the construction industry has embarked on a journey of slow transformation towards the digitization of its key processes, which the Covid-19 crisis is undoubtedly accelerating. The need to continue executing projects under conditions of social distancing and limited capacity necessarily constrains the work and productivity of workers at construction sites. Hence, the trend towards process automation and the use of remote and industrialized production solutions is increasing.