Construction Companies Consider Major Changes to Pricing, Focused on Efficiency as Inflation, Disruption Continue
According to a recent study from Umpqua Bank, U.S. construction companies are employing a number of strategies to become more efficient and position themselves for an economy almost half of those surveyed expect to become more challenging in the next 12 months.
Concern over inflation, which ranks as the overall top concern of construction companies, appears to drive a mixed outlook for the industry. Nearly 5 in 10 construction companies surveyed as part of Umpqua’s Bank’s 2022 Business Barometer, a nationwide study of small and middle market companies, expect conditions to worsen over the next year. More than 8 in 10 expect their prices to increase, with 51% also anticipating a corresponding spike in revenue.
More than 7 in 10 surveyed companies are also having difficulty finding qualified employees, and supply chain disruption continues to pose a significant hurdle. Only half of construction companies surveyed say they’ve been able to purchase the goods in a timely manner needed to run their businesses.
In response to challenges, 78% of construction leaders are likely to make significant changes to their pricing models, and 54% are likely to make investments in digitization to become more efficient. Compared with other sectors, construction leaders are also more focused on finding new suppliers (62%) or strengthening relationships with current suppliers (53%) as they navigate ongoing supply chain disruption.
“The economy poses significant challenges to the construction industry, as firms navigate the more recent impact of inflation, supply chain problems, and workforce disruption,” said Richard Cabrera, Umpqua’s head of middle market banking. “Leaders are taking strong steps to navigate these challenges, and those that remain focused on investing in improvements and efficiencies will be positioned better for the future no matter the direction of the economy.”
Other notable insights from Umpqua Bank’s research include:
- Among several issues related to attracting and retaining workers, 59% of construction companies cite a lack of qualified candidates with the right skills as their top staffing challenge.
- Rising interest rates and uncertainty related to COVID-19 or continued outbreaks are also cited frequently, with nearly 4 in 10 ranking both as top-three challenges.
- In addition to changing pricing models, a solid percentage of construction leaders have other strategic moves in mind, including automating more repetitive tasks (63%), making significant changes to products or services (45%), increasing their real estate footprint (41%), and financing the expansion of their business (23%).
- In response to cybersecurity concerns, 49% are likely to invest in financial tools to protect their businesses’ payment systems.
For more insights on how small and mid-size companies are adapting to current economic challenges, visit: www.umpquabank.com/business-barometer.
About Umpqua Bank
Umpqua Bank, headquartered in Roseburg, Ore., is a subsidiary of Umpqua Holdings Corporation and operates across Arizona, California, Colorado, Idaho, Nevada, Oregon and Washington. Umpqua Bank has been recognized for its innovative customer experience and banking strategy by national publications including The Wall Street Journal, The New York Times, BusinessWeek, Fast Company and CNBC. The company has been recognized for eight years in a row on FORTUNE magazine’s list of the country’s “100 Best Companies to Work For,” and was recently named by The Portland Business Journal the Most Admired Financial Services Company in Oregon for the 17th consecutive year. In addition to its retail banking presence, Umpqua Bank also owns Financial Pacific Leasing, Inc., a nationally recognized commercial finance company that provides equipment leases to businesses.