The construction industry is the pillar of almost every other industry and strongly affects the economy, the environment, and the society as a whole. As per the statistics provided by the World Economic Forum (WEF), the construction sector holds 6 per cent of the global gross domestic product (GDP) along with being the largest global consumer of raw materials among different industries.
According to the WEF statistics, the construction industry accounts for 6 per cent of global GDP and is the largest global consumer of raw materials. With the expansion of all other industries, involving the construction of new factories, and continuous infrastructural development, both in developed and developing economies, the global construction sector is set to boom in the near future. Although revenues in this industry are progressively rising, it is still facing some challenges related to sustained cost pressures as well as ongoing shortage of labor. However, despite all these challenges, companies in the E&C (engineering and construction) sector have still several significant opportunities in their way supported by favourable government policies and initiatives and smart city mega-projects.
Governments as well as global organizations are implementing various policies and programmes to boost the construction activities across various nations. Growing global population means more houses required for people to live. As per the World Bank Group figures, the global population witnessed a rise from 6.922 billion in 2010 to 7.674 in 2019. This is putting extreme pressure on governments to provide affordable housing to each and every person in different countries/regions.
Global Total Population Data, in Billion, 2010 to 2019
Source: The World Bank
As a result, the implementation of various housing policies and initiatives by governments is paving the way for construction activities to rise in a continuous manner. The British government, for instance, is providing funding to support the country’s housing market through initiatives such as the Funding for Lending Scheme and Help-to-Buy Equity Loan Scheme. In Malaysia, under the new housing policy, the rent will be capped at 25 to 30 per cent of household income for residents of low-cost homes while tenancy will be kept at a maximum of 3 years. Rent will also be gradually increased to encourage tenants to buy homes in an effort to make homes more accessible to low and middle-income groups. Thus, rising construction of houses will continue to drive the market growth of concrete transport truck worldwide during the forecast period.
Another factor that is fuelling the market growth of concrete transport truck is the high investments being funnelled into smart city projects. With continous rise in the concentration of ever-increasing population in urban areas, supported by the expansion of Internet of Things (IoT) and other advanced technologies and solutions, smart cities are being viewed as the optimum solution that can ease the damaging effects of growing urbanization. Rising investments, both public and private, towards the expansion of smart cities, will also add up to the construction activities throughout the next five years. For example, New Manila Bay City of Pearl in Philippines is a promising reclamation project and will be funded as well as developed by a consortium. This consortium is led by UAA Kinming Group Development Corp., a local company, along with a mix of global companies from different countries and regions including Europe, China, Southeast Asia, and Hong Kong. According to the Hong Kong’s Secretary for Innovation and Technology, the Hong Kong government made the development and promotion of smart city construction as one of its main priorities in 2019. The Hong Kong Science and Technology Parks Corporation (IT Park) and the Hong Kong Productivity Council (HKPC) have also been working closely with the government to support the development of technology in smart cities.
Rising number of manufacturing facilities across various industries is another booster for the growing global construction sector. Global companies across various industries such as chemical, pharmaceutical, automotive, and electronics are spending heavily in the expansion of their R&D as well as production facilities so as to offer better services to their customers in different locations as well as reducing the transportation cost. Moreover, many countries are providing several tax exemption benefits to companies which set up their plants in their geographic area in order to boost their own GDP. For instance, the government in Brazil is making its domestic semiconductor and electronics industry stronger by offering tax incentives on domestically produced goods including computers, telecommunication equipment, and appliances while charging more tax on imported ones. Brazilian taxation policies also provide exemption to companies that invest in the country’s semiconductor production which include discount on municipality taxes and exemption from federal taxes (COFINS, PIS, and ISS). The United States is also taking strict measures to boost its domestic manufacturing and reducing its reliance on imported goods. The replacement of NAFTA (North American Free Trade Agreement) by USMCA (United States-Mexico-Canada Agreement) has made it mandatory for automakers to manufacture 40% of their motor vehicles in facilities where assembly workers earn minimum US$16 per hour. With the average wage of a worker in Mexico being relatively lower to pass this criteria, U.S. automakers will be forced to shift their production facilities back in the country which will eventually lead to the expansion of automotive plants in the country in the near future.
Growing competition among firms to stay ahead of their competitors in the respective markets is calling out for more and more investments in research and development projects. For example, more than 60 per cent of chemical firms in Germany are involved in research and development activities, with R&D spending exceeding €11 billion annually. In 2018, the Russian government approved the national research strategy that stretched to 2024, calling for more investment, extra-support for early-career scientists, and around 900 new laboratories focusing on genomics, mathematics, robotics, and material research.
World’s Top 10 Leaders in R&D Investment, R&D Expenditure (Latest Available Data), Billion PPP$
Source: UNESCO Institute for Statistics
However, the recent global pandemic outbreak caused by COVID-19 has halted construction activities around the world which, in turn, has also negatively impacted the demand for concrete transport trucks. Mandatory government lockdowns and social distancing measures has resulted in complete shutdown of several construction sites due to global supply chain disruption and lack of availability of labor. On the demand side, reduced economic activity has led to a decline in demand for new commercial or industrial facilities. Also, loss of income along with lack of consumer confidence has negatively affected the demand for both housing construction and renovation. With the ongoing situation, the market players in the construction industry will have to find new ways to retain their revenues keeping up in mind the uncertainty due to this pandemic outbreak.