Concerning signs for Canada’s construction sector in 2023

Independent Contractors and Businesses Association Chris Gardner in Canadian Business Quarterly

Coming into 2022, construction contractors had never been more optimistic about the state of the industry.

Independent Contractors and Businesses Association ICBA’s annual Wage and Benefits Survey of hundreds of companies, found that 96 per cent of contractors expected 2022 to be as busy or busier than 2021 – a record number. Coming out of the struggles of the COVID-19 pandemic, every contractor in every region of the province was bullish on the British Columbia economy.

We are putting together our questions for the 2023 version of the survey. But already, we see concerning signs – both anecdotal and statistical – that the optimism of builders is starting to melt away. And, as inflation skyrockets and interest rates rise, owners and developers are being more cautious about making investment decisions and for some trades, order books are starting to shorten slightly.

Three major shortages have really defined construction in 2022: shortage of people, shortage of supplies, and the seeming shortage of leadership from any level of government in Canada to tackle these issues head-on and in a meaningful way. The central question throughout this year has been, to what extent will any or all these factors impact the construction sector and play into the one issue that overhangs not only construction, but also the economy as a whole – affordability.

It’s clear now that we have our answer – the shortage of people is acute, costs for materials, while moderating, remain very high, and the government continues to layer on regulations and red tape. The result: construction costs are rising, and affordability remains out-of-reach for first-time home buyers and those looking to up-size to accommodate larger families.

Even before the summer construction season, three-quarters of contractors reported to us that there simply were not enough workers to fill the jobs they had available – an acute challenge that is impacting every part of the construction value chain.

Every single one of ICBA’s glazing, masonry, roofing and sprinkler fitting companies reports a shortage in labour. So do 95% of our plumbing companies, 91% of our carpentry contractors, 90% of our pipefitter companies, and 89% of our refrigeration and HVAC firms.

The shortage of people is a long-term challenge – driven by an aging population and not enough people entering the workforce. It’s not just construction feeling this pinch, but virtually every sector of the economy.

There is no short-term solution, but two things can help: increasing immigration and using technology to improve productivity.

Government should make smarter investments in the trades. Wait lists for training schools are chronic – it should not take nearly a decade to get a red seal designation in the construction trades. And it makes no sense that for many trades there is only one school in the entire province. Instead of trying to jam more apprentices into these already full spots, governments should be investing in more trades and technical colleges; curriculum should be modernized, and more online delivery should be incorporated into trades programs.

Compounding the labour shortage is the ongoing supply shortage, brought on by the pandemic, a loss of purchasing power, overseas manufacturing slowdowns, shipping strains, and increasingly more extreme weather events. Coming into 2022, 76% of ICBA companies said they were taking longer to source construction materials for projects.

The overhang of a changing geo-political landscape is driving significant changes on where supplies are sourced – the supply chain is coming closer to home and the security of supply chains is being considered in ways not seen in generations.

While some shortages have been resolved – lumber prices, for example, was a huge story early in the pandemic but have since come back to earth – others have taken their place. Paint, steel, dump trucks, machinery, glass, electrical fixtures, and other items have all been challenging and expensive to source. Add to that the growing cost of fuel – needed to move every item to a worksite – and the budgetary pressure on contractors keeps growing.

Red tape and regulations continue to delay projects and cripple Canada’s competitiveness. Far too often, it’s just too difficult to get things done in Canada. We are a country of enormous potential and opportunity, but we trip over ourselves with red tape and a regulatory framework that is often punishing for those seeking to invest, expand, and build things.

It’s embarrassing that Canada ranks 64th globally for how long it takes to process a construction permit – this according to the World Bank. This causes businesses and investors to take their ideas, their people, and their capital elsewhere.

When it comes to infrastructure, government is astonishingly short-sighted. We simply take too long to approve and build critical pieces of infrastructure. It should never take as long to approve a permit as it does to build the actual project – and yet that is a regular occurrence in British Columbia.

It’s no wonder the construction industry is approaching 2023 with caution as headwinds and storm clouds gather on the horizon. Just one of these three shortages – people, supply chains and a chronic lack of leadership – would be concerning enough, but this perfect storm is presenting challenges that require fresh thinking and new ideas from both the public and the private sector.

Chris Gardner is President of the Independent Contractors and Businesses Association (ICBA), www.icba.ca.

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