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Economic

New report outlines tough times ahead for B.C. construction

Peter Caulfield
New report outlines tough times ahead for B.C. construction

According to a recently published report, the sunny skies under which the B.C. construction industry had been basking have been replaced by wind, rain and cold, with more of the same in the forecast for much of the sector in the province.

“The results of the report were chilling,” said BC Construction Association (BCCA) president Chris Atchison. “They confirmed what we had heard and seen anecdotally.”

The construction industry in B.C. is massive, essential and struggling, he said. 

“Make no mistake; many employers are reaching the breaking point,” he said. “The urgent need for more housing and other infrastructure development hangs in the balance.”

The nine-page report, which was prepared for the BCCA by the Sage Policy Group, details what it calls the B.C. construction industry’s reversal of fortune, which began almost three years ago.

From the start of 2017 until February 2020, investment in industrial, commercial, and institutional/government (ICI) construction in B.C. increased more than 50 per cent in real terms (after adjusting for inflation).

Then came COVID.

Between February 2020, the last month before government-mandated lockdowns came into effect, and July 2022, ICI investment in B.C. had fallen almost 11 per cent.

The report noted while part of ICI – the institutional/government segment – has held up fairly well, investment in the commercial and industrial segments, which are more likely to be privately financed, has fared poorly, thanks to the shift to remote work and other adjustments in economic behaviour.

Investment in the commercial (down 5.6 per cent) and industrial (down 5.8 per cent), sectors have both decreased since the start of the pandemic.

The report goes on to say while most of the Canadian economy has bounced back, and national unemployment is low by historic standards, the way in which people use space has changed, which is bad news for commercial construction investment.

In addition, the cost of materials and equipment has surged, thanks to global supply chain disruptions and a relatively weak Canadian dollar.

To make an already challenging situation worse, said Atchison, the provincial government has failed to deliver on prompt payment legislation.

Without it B.C.’s contractors will experience significant financial risk, taking on increased cost of debt and courting bankruptcy, as they wait 90 to 120 days to be paid.

“Waiting to be paid is getting even more expensive,” said Atchison in an announcement. “Slow payment is unique to our industry. With the costs of goods, labour and borrowing all rising, many B.C. contractors are reaching crisis.”

So what, if anything, can be done?

“Everyone in the industry can do something to help,” said Atchison. “The provincial government can pass prompt payment legislation now. Owners and contractors can talk to each other and be ready to compromise. And owners, don’t blame contractors for increases in cost, it’s not their fault.”

Commenting on his findings, Dr. Anirban Basu, CEO of Sage Policy Group and author of the report, said one of the downsides of British Columbia’s until-now dynamic economic environment has been the rapid creation of many new construction firms. 

“As a result, there is an unusually high number of firms that are young and financially fragile,” said Basu. “Many have never encountered significant macroeconomic or market headwinds. That is changing, which is one of the reasons the risk of substantial firm failure is high.”

Basu said he was surprised B.C. policy-makers have not been more supportive of the industry.

“Prompt payment legislation is the most obvious example,” he said.

The report’s grim findings notwithstanding, not every segment of the construction industry is in dire straits.

“Our members are doing very well now and they’re looking forward to undertaking more government projects in the future,” said Kelly Scott, president of BC Road Builders and Heavy Construction Association.

Scott said his members are also “not too worried” about a shortage of workers.

“The Site C dam, the Patullo Bridge and the other infrastructure projects around B.C. and Western Canada will all come to an end and their well-trained workers will be looking for their next job.”

The complete Stat Pack, economic report from Sage Policy Group and more information regarding the value of the construction industry to B.C.’s economy can be found here.

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