The Engineering, Procurement, and Construction (EPC) industry launched off to a hot start in 2022 in spite of global supply chain disruptions and a volatile labor market. However, this isn’t to say everything was rainbows and unicorns. It’s still a competitive market out there, and price increases have put extra pressure on an industry where new projects are outpacing the available supply of material and labor to complete them.
Material prices are higher now than at any point since 1987. The U.S. Bureau of Labor Statistics has data showing that construction input prices rocketed up 24% in 2022 alone. This, compounded with a labor shortage that has no end in sight has led to fierce competition for resources and a search for alternative ways to differentiate your company.
As we prepare for next year, let’s take a look at the 2023 EPC industry outlook from Deloitte for pointers. A rush of new government money is sure to prop up capital projects in the coming year (the Infrastructure Investment and Jobs Act and the CHIPS and Science Act of 2022), but it’s these five EPC industry trends that will shape the market most in the early going.
Inflation is gonna stick around as a driving force in 2023. This will initially mean more uncertainty than a year ago, when prices were more stable and interest rates hadn’t yet jumped up. EPC companies will be watching closely to see how these money matters impact their backlog of projects, and this is sure to rear its head in the latter half of 2023, once things start catching up a bit. We’ll be interested to see if the glut of energy-related construction and data centers currently underway continue to sustain market dynamics, or if an economic slowdown on deliveries is inevitable due to a tightening of purse strings.
This isn’t new news, but it’s going to remain a reality into next year. The COVID-era bottlenecks and other disruptions (a war in Europe, natural disasters, etc.) have already driven some radical transformations in how EPC companies are doing business. In 2023, it’s expected that these sorts of challenges will continue driving new business models and a search for resilient, reliable alternatives. Troop Industrial counts ourselves among the service providers who are putting our backs into the work of building out these new capabilities with predictive supply chain intel and technology-enhanced pre-planning.
The robust project pipeline is great, but it’s only worth as much as the available labor to do the work. Infrastructure build outs and other mega projects will struggle to overcome the labor shortage and high turnover that are currently dogging the EPC space. It’s possible that wages and benefits continue to adjust to attract and retain talent while we see other new solutions put in place to increase the training and number of available skilled workers.
Tech will play a big role in the changes we’ll see in the EPC industry next year. Digital technologies have already proven in 2022 that they can boost profits, reduce costs, and drastically improve project execution. Those benefits are getting visibility and attracting more and more companies to the benefits of software for tasks like material management, KPI tracking, and team coordination. While the industry has been slow to embrace tech, things are speeding up.
There’s always something new when it comes to regulations. This year will be no different, as pressure will continue to increase the use of so-called “green” construction materials. There are some market incentives, it’s true, as investors and customers are demanding these measures as well. More EPC contractors and construction companies will spend 2023 factoring sustainability impacts into the math of their project planning and designs and looking for ROI.
These five EPC industry trends will have a big impact, but there’s more to it. Check out the full report for all the details or follow the Troop blog for regular industry updates! We’re ready to kick off this new year and start grinding.