This year’s industry analysis for the construction industry offers both good and bad news. The good news comes from the 2021 numbers, which generally look reasonable with progress on several parameters since 2020.
Bad news around the corner
We can expect the bad news just around the corner when a cocktail of plummeting consumer confidence, price increases for energy, wages and building materials, geopolitical unrest and extensive reporting requirements hit the industry.
– The Covid-19 crisis was not particularly bad for the construction industry initially. Many Danes seized the opportunity to start renovations and build new when they had been sent home for months anyway, and the activity, therefore, peaked in 2021. The primary operating result per employee has climbed above 13.500 euros in our new analysis, says partner in Deloitte Thomas Frommelt.
Low earnings in the industry
If you look at the seven sub-sectors in the analysis – construction contractors, building contractors, masons, carpenters, painters, electrical installers and plumbing – there have been several interesting movements during the year.
Most sub-sectors have experienced a positive development in the profit margin from 2020 to 2021, except for the painters and bricklayers, which is primarily due to wage development. In 2021, building contractors were the best-earning and painters the lowest-earning subsector in the analysis, while construction contractors have come out of the year well with a considerable boost in earnings.
Overall, however, earnings in the construction industry are still low, regardless of whether you measure the primary result per employed or the profit margin.
Sustainability requirements and crisis atmosphere
In 2021, activity in the construction industry reached its highest level for years, but towards the end of the year, the trend reversed.
– To simplify, the big ugly wolf is on its way. And if you have not built your house from a particularly resistant material, you risk being blown over. When the pandemic hit in 2020, it brought with it a lot of innovation in many industries. I certainly hope that the crisis we are facing now can similarly be an opportunity for innovative business concepts in the industry. The big problem is that the pockets of those who had to fill the order books are empty and that the new garages were built during the lockdown, says industry leader Thomas Frommelt.
At the same time, the industry faces new requirements for sustainability reporting, which will require extensive documentation work for the companies covered. Since the construction industry accounts for almost 40 per cent of the world’s CO2 emissions on a global level, the industry is expected to contribute to reducing its high CO2 footprint from energy and building materials in particular.
Sustainability will therefore take up a lot of space in the industry in the coming time, Deloitte estimates, both when it comes to reducing emissions of greenhouse gases and on the reporting side.
Selected key figures from Deloitte’s industry analysis
- The construction industry’s primary result per employee was 14.116 euros in 2021 (an increase from 12.772 in 2020).
- 89% of companies in the industry made a profit in 2021 (same level as 2020).
- The profit margin in the industry was 5.8% in 2021 (up from 5.4% in 2020).
- The solvency was at 31% in 2021 (a drop from 33% i 2020).
