Outlook
Global construction market outlook
Global skilled labour shortage drives up the construction cost
Global construction costs are rising due to a persistent shortage of skilled labor. This shortage is particularly acute in developed nations, where aging workforces, declining interest in construction careers, and high unemployment rates are driving up wages.
The UK and Australia continue to face significant labor shortages. Similarly in North America, labor shortages has been identified as a critical issue.
In developing and emerging markets, rising unemployment rates are helping to stabilize labor costs. However, these regions still face challenges from the pandemic and geopolitical tensions.
Wage data also indicates that the construction wages have increased by an average of 4.6% over the past year. This is slightly lower than the growth observed in previous years, but it still reflects substantial inflationary pressures.
Higher consumer prices have forced the industry to raise salaries, further contributing to construction cost inflation.
Figure 5:
Availability of construction labour by region
Message from Katherine Collins
“The Global outlook offers Shell RE a comprehensive view of the industry’s performance across regions. By anticipating shifts in market conditions, we can pivot strategies, mitigate risks and capitalise on emerging opportunities, ensuring long-term competitiveness and sustainability in the global market.”
Katherine Collins Central PMO, Assurance and Learning Lead
Figure 6:
Average hourly wage (USD) by region – Adapted from Turner & Townsend’s International Construction Market Survey 2024
Supply chain
Materials
Construction material prices have stabilized after reaching record highs in recent years.
While supply chain disruptions have eased, geopolitical tensions and conflicts continue to pose a significant threat to global supply chains.
In response, countries are exploring strategies to relocate production closer to home, aiming to reduce reliance on global supply chains. This shift, known as "friend-shoring" or "onshoring," may increase costs due to factors such as higher domestic labor and plant expenses.
However, it could also present several benefits, including improved supply chain certainty, reduced transportation costs, and lower carbon emissions. As the world continues to navigate a complex geopolitical and economic landscape, the trend towards more localized production is likely to persist. While the transition may present challenges, it also offers opportunities for greater resilience and sustainability in global supply chains.
Message from Shyam Murugesan
“Understanding market changes, particularly construction cost inputs, can help deliver better results by enabling informed decision-making, risk mitigation, and cost optimisation.”
Shyam Murugesan Central PMO, Performance Lead
