Navigating the storm: construction industry makes the most of the GFC

The report reflects the results of more than 100 interviews with senior leaders at engineering and construction companies in more than 30 countries worldwide, including Australia.

The survey revealed that 65 per cent of global respondents believe that government stimulus packages will increase opportunities over the next twelve months. Australian contractors were far more optimistic with 93 per cent expecting an increase in opportunities.

In the past twelve months, over two thirds of Australian respondents have achieved or exceeded their backlog and profit levels of the same period last year. Three out of four local contractors expect to achieve or improve current levels of backlog and profits over the next twelve months.

KPMG’s National Sector Leader for Real Estate and Construction Steven Gatt says “There is a perception that the GFC has devastated the construction industry. While it has had an impact on the way these companies do business, we found that in the majority of cases global contractors responded by becoming leaner, restructuring operations and rationalising costs. When the recovery arrives, these companies should be well prepared to succeed.”

However, the construction industry has not remained unscathed by the GFC. Half of Australian respondents indicated that margins on incoming jobs are lower than margins on existing jobs.

Contractors are planning to maintain profit levels by cutting costs of doing business. This may include reducing general labour and back office staff.

Despite the need to cut costs, only four per cent of local contractors will shed their project managers. Risk management is also an area which will continue to be invested in, as risk management is now viewed as a “÷must have’, rather than a competitive advantage.

Proposed changes to revenue recognition are also a source of future concern. Both global and local contractors overwhelmingly voted against proposed accounting rule changes on revenue recognition believing these would make it harder to understand results and forecast performance.

To read KPMG’s latest Global Construction Survey, Navigating the Storm, click here.

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