On Saturday 28 February, the front page of The New York Times’ print edition carried one small item at the bottom on Iran. “Iranians Cite Progress in Talks” said the headline, flagging a story deeper in on page 9.
That day, however, US and Israeli bombs began raining down on the Islamic Republic and, within two weeks, the world had noticed that the Strait of Hormuz was blocked, sending oil prices to heights not seen since Russia’s invasion of Ukraine four years earlier.
This is just one aspect of a global picture that is draining confidence among construction executives across the world, according to the latest annual Construction Certainty Index from cost and project manager Currie & Brown.
It commissioned a survey of around 1,300 construction and infrastructure decision-makers across the Americas, Europe and Asia-Pacific. Their responses show that industry nerves are febrile.
Two findings stand out. First, global uncertainty has added 12.4% to average construction project pipeline costs over the last 12 months, equating to almost $2trn, a figure close to the annual economic output of Brazil.
Second, and less abstractly, fewer than half of organisations (46%) are confident that they can meet project deadlines, while only 40% are confident that they can stay within budget. These figures are down 12% and 14% respectively from last year’s poll.
Confidence in freefall, outlook worse
Confidence has fallen across every measure tracked, with the sharpest declines in the two areas that matter most to project viability: time and budget.
Seven in 10 (70%) respondents identified material cost inflation as having a high impact on project delivery, 64% identified energy price volatility and 59% supply chain disruption.
Economic policy change (56%) and labour and skills shortages (54%) are also significant factors. These risks are connected and amplify one another, Currie & Brown noted, increasing the overall pressure on project costs and delivery.
Respondents report that 30% of projects on average have been delayed over the past year and 27% say projects have been descoped.
On average, 31% of potential projects have not started or progressed beyond planning as a result of uncertainty.
Worried about everything, everywhere, all at once
Few think things will get better. Organisations expect most of these risks to worsen over the next two years, with 65% expecting material cost inflation to speed up and 58% expecting increased energy price volatility.
Respondents were comparatively sanguine about “rapid technological innovation” (ie, AI killing us all within the decade) and climate risk.
But, not very reassuringly, Currie & Brown notes: “The next major disruption may not be visible in today’s data. Disruption from a geopolitical flashpoint, energy shock, or climate event can ripple quickly across markets, affecting oil prices, materials, insurance and procurement at the same time.”
The happy, investing few
Despite all this, the survey reveals a distinct group of organisations reporting higher levels of delivery confidence and fewer impacts from uncertainty.
Currie & Brown calls this group, which represents around 32% of respondents, “higher maturity” organisations. Instead of freezing in the face of uncertainty, they continue to invest in areas associated with stronger decision-making, including:
- Greater use of AI to deal with risk;
- Digital technologies to improve project performance and asset decisions;
- Data analytics to mitigate uncertainty;
- Embedding sustainability into project delivery;
- Investing consistently in skills and training.
Among this group, 58% say they’re confident they’ll meet deadlines and 47% say they’ll stay within budget, compared with 41% and 36% logged, respectively, in the rest of the sample.
Just 26% of these mature prodigies report cancellations affecting 25% or more of their pipeline, against 40% for the rest of the sample, a difference of more than a third.
Currie & Brown group chief executive Dr Alan Manuel claimed this gap showed that targeted capacity building can improve resilience in the new world of perma-shock.
“Organisations can’t afford to lurch from one crisis to the next or simply wait for calmer conditions,” he said.
“Those that are resilient to uncertainty share common characteristics. They’re investing in the people, technology and data that enable them to gain an earlier, clearer view of where they are exposed – and the judgement and skills they need to take action.
“Embedding this approach is how certainty is built.”
Read the report here.
