Engineering and Construction Outlook

Analysis

2021 engineering and construction industry outlook

Explore digital transformation and business model trends

The US engineering and construction (E&C) industry began 2020 on a bright note—and then COVID-19 hit. Despite the challenges that have resulted, there are reasons to be optimistic. Explore five engineering and construction industry trends that will impact the coming year, from connected construction to new business models.

E&C companies adapt to ongoing impacts of the pandemic

The construction industry added more than $900 billion to the US economy in the first quarter of 2020—its highest level since the 2008 recession. It employed 7.64 million people in February 2020, also the highest levels since 2008. Then, COVID-19 reached the United States, causing the industry to lose $60.9 billion in GDP and decreasing total jobs to roughly 6.5 million, effectively wiping out two years of GDP gains and four years of job gains.

The E&C industry, however, learned from the 2008 recession and was well-positioned to weather this economic shock. It had better control over its leverage and credit and created a buffer through additional cost savings. However, industry performance during the remainder of 2020 has been mixed. Some E&C companies were more exposed to COVID-19–affected segments (like retail and hospitality), while others were not able to capitalize on technology advancements. Most E&C companies continue to face sustained cost and margin pressures. Additionally, despite strong order books, companies are experiencing challenges such as project delays and cancellations, as well as difficulty obtaining permits. In addition, increases in the procurement costs of materials and equipment continue to stymie many E&C companies.

The good news is that there are reasons to be optimistic for the future of the engineering and construction industry. Connected technologies and an increase in associated investments may help firms realize new operational efficiencies. New business models and an increase in M&A activity are further accelerating the shift toward digital transformation in engineering and construction, as well as operational efficiencies. Also, E&C companies are likely to help other industries unlock the future of workplace solutions.

Podcast: 2021 engineering and construction industry outlook

Five engineering and construction industry trends

Preparing today for tomorrow’s unknowns in the future of the construction and engineering industry

2020 was an unforgettable year in many ways and one that may have permanently changed the world. The E&C industry was able to respond faster than other industries due to strong order books and demand from the residential segment. 2020 likely also helped E&C companies to reset and prepare sooner and more effectively for work, workforce, and workplace changes. The year ahead is only expected to accelerate these changes.

Connected construction presents a host of efficiency- and productivity-enhancing technologies that can enable new business models and strategies. There may be another disruptive event around the corner that could catch the world off guard. But E&C firms that embrace digital, form strategic alliances, and prepare for the future of work are most likely to be better prepared for whatever comes next.

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