Prospects are bullish for Ontario’s industrial, commercial and institutional construction sector, according to an annual survey commissioned by the Ontario Construction Secretariat (OCS).
When looking ahead to 2014, the number of construction contractors who are expecting an increase in business is up from 2013, driving the OCS Construction Barometer to 64, a four-point increase over last year.
“Growth in the Greater Toronto Area is really fueling optimism across the province in the non-residential construction sector,” says Sean Strickland, Chief Executive Officer of the OCS. “There are big projects on the books in all regions that are inspiring good feelings amongst our contractor partners.”
The Construction Barometer gauges contractors’ perceptions of business conditions over the next 12 months. Measured on a scale of zero to 100, a reading above 50 indicates the amount contractors who expect to conduct more business in the coming year is greater than those who do not. The larger the gap above 50, the greater the level of optimism.
Data used to determine the Construction Barometer is collected from an Ipsos-Reid survey of 550 non-residential ICI contractors. The 2014 survey found nearly 40 per cent of contractors anticipate conducting more business this year, dwarfing the mere 11 per cent who expect business to drop.
Although contractors are the most optimistic in the GTA, the biggest shift in perceptions year-over-year came from Eastern Ontario. Contractors are expecting to conduct more work, on balance, in each of the major construction sectors, led by the commercial, engineering and high-rise residential sectors.
Firms were the least optimistic on prospects for the institutional sector, which is consistent with continued fiscal austerity in the public sector.
“We expect all areas of Ontario will benefit from a more robust construction sector in 2014,” says Strickland. “Construction projects are helping drive Ontario’s economic recovery.”
33 per cent of contractors expect to boost their staff, down 5 ppts from last year’s survey. However, the proportion is still above-average when all past surveys are considered. Only 9 per cent of contractors expect to scale-back their workforce. Labour availability issues continue to challenge the industry as nearly 73 per cent of contractors reported either an “extreme” or “somewhat” of a shortage of labour, up nearly 10 ppts from last year’s survey.
On a related note, 80 per cent of contractors expect to operate at a “high” capacity this year, versus 75 per cent in last year’s survey. Along with operating at a “high” capacity, a large share of contractors expect to deal with increased input costs this year, including a much higher cost of labour. In response, the majority of firms anticipate passing their increased costs on, though some expect that their profit margins will shrink and a few may even resort to cutting staff.
Nearly 60 per cent of contractors reported employing an apprentice, the 2nd straight yearly increase. Another positive aspect of the survey was that a slightly higher percentage of contractors reported increasing their investment in apprenticeship training than last year. This is crucial as when asked what the greatest challenge to increasing their business was going to be over medium term, the largest share of contractors reported labour shortages as the number one obstacle.