BDO Construction Survey Report 2024

A promising future for Australia’s construction sector

This report was originally published 17 October 2024, page last updated 31 October 2024.

Our latest BDO Construction Survey Report 2024 dives deep into the metrics that matter most. This year, we uncover not just numbers, but the stories behind them—stories of resilience, innovation, and the evolving landscape of an industry shaped by both challenges and opportunities. 

With rising revenues tempered by tough profit margins, and a workforce grappling with a skills shortage, the construction sector is navigating complex terrain. Our comprehensive analysis of tier one and tier two construction companies reveals crucial insights into financial performance, business priorities, technological advancements, and the pressing need for diversity, equity, and inclusion. 

What you’ll discover 

In this report, we distil the key trends and challenges defining the construction landscape today. From the ongoing impact of COVID-19 on legacy projects to the critical role of client relationships in ensuring future growth, the findings are designed to equip you with actionable insights. We also explore how technology and sustainability are an opportunity to reshape the way we build and operate. 

Key takeaways 

The 2024 BDO Construction Survey Report highlights key trends and challenges shaping Australia's construction industry. 

  1. Revenue and profit margins 
    While revenue continues to rise, profit margins remain under pressure due to high costs, legacy projects, and ongoing subcontractor and supply chain issues. Companies need to assess their risk management strategies to safeguard productivity and profitability. 
  2. Legacy projects and client relationships 
    Construction companies are still navigating the effects of COVID-impacted legacy projects. However, there is a growing focus on return clients in FY24, making the cultivation of these relationships essential to maintaining a steady project pipeline and ensuring long-term growth. 
  3. Productivity challenges and technology 
    Productivity remains a significant issue, hindered by project delays, supply chain disruptions, and labour shortages. While innovations like modular building techniques and AI offer potential solutions, widespread adoption of these technologies has yet to occur. 
  4. Workforce and diversity 
    The industry faces a skilled labour shortage, and efforts to improve diversity, equity, and inclusion are still evolving. Attracting and retaining a diverse workforce, particularly in leadership positions, is crucial to the industry's future. 
  5. Sustainability and ESG reporting 
    New environmental, social, and governance (ESG) reporting requirements are on the horizon, with companies showing increased interest in ESG initiatives. However, accurate reporting remains a challenge, and ESG is not yet a major competitive factor in the construction sector, especially with the high costs of building projects. 

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Participant overview 

A total of 12 construction organisations completed the survey in 2024, with 67 per cent of participants reporting FY24 revenues of less than $750M. 

Most of the construction companies surveyed operate in commercial, government and industrial subsectors, with a smaller number of companies operating in residential construction. Other subsectors included retail, childcare, aged care/senior living, data centres, and modular construction.  

Insights and analysis 

As we delve into the survey findings, you’ll see a multifaceted picture of the industry. While 42 per cent of companies reported revenue increases and small increases in net profitability, the broader landscape indicates that legacy issues still impact construction companies, signalling cautious optimism. Our expert analysis highlights how strategic shifts—such as managing subcontractor relationships and addressing labour shortages—are critical for maintaining sustainable growth and ensuring viable operations.  

Below, we explore the key insights and actionable strategies to navigate the complexities of today’s construction environment.  

Financial performance: modest growth, rising risks  

Despite ongoing industry challenges, the survey results reflect some positive financial trends in FY24. About 42 per cent of respondents reported revenue increases, a noticeable dip from the previous year’s 72 per cent, indicating a slowdown in overall growth. However, net profit margins are on the rise, with an average of 2.3 per cent in FY24, up from 1.77 per cent in FY23. Interestingly, 67 per cent of respondents noting an increase in net profit before tax of more than 10 per cent. 

BDO insight  

BDO's analysis attributes this improvement partly to the completion of legacy projects affected by COVID-19, which often carried high costs, tight margins, and delays. As these projects come to an end, companies are making more strategic decisions on project bids and improving their focus on managing subcontractor relationships and supply chains. This shift is improving profit margins but at the cost of lower overall revenues, as companies take on fewer projects to reduce exposure.  

The slight profitability uptick in FY24 also reflects a cautious return to better margins after a particularly challenging FY23. Companies have learned from the difficulties of COVID-impacted projects and are now better equipped to make informed decisions on project bids, leading to more sustainable long-term gains.  

Subcontractor and supply chain risks: a growing concern 

Subcontractor performance remains a critical issue, with 82 per cent of respondents reporting financial losses linked to subcontractor insolvency in FY24. More than half the respondents employ over 1,000 subcontractors, and increased competition, coupled with supply chain disruptions, has significantly impacted profitability. While 55 per cent reported minor impacts, 27 per cent suffered significant financial losses. 

BDO insight 

BDO's analysis emphasises that subcontractor failure often forces head contractors to either absorb the debts of subcontractors or incur delays and costs from sourcing new ones. This results in increased project timescales, added costs, and a heightened risk of breaching contract timelines, further eroding profitability. Despite the clear financial risks, 55 per cent of respondents do not regularly conduct formal performance reviews of their subcontractors, and only 27 per cent conduct financial assessments on an ad-hoc basis.  

Subcontractor failure remains a key challenge, particularly in an environment of increasing financial distress. Rigorous due diligence on subcontractors, both at the outset and throughout a project’s duration, can mitigate risks and protect profitability. Head contractors need to be proactive in managing these relationships to prevent project delays and cost overruns.  

Workforce challenges: skills shortages and productivity decline

Labour shortages continue to undermine productivity, with 83 per cent of surveyed companies reporting a shortage of skilled workers and 92 per cent stressing the need for more training opportunities. Factors contributing to this shortage include limited migration of a skilled workforce and the declining interest in trade careers, as societal preference has shifted toward university education.

BDO insight

BDO's analysis highlights that the lack of skilled workers has driven wage growth and higher operational costs, further straining profitability. The complexity of visa processes and delays in approvals have also hindered access to migrant workers, exacerbating workforce shortages. Additionally, future government infrastructure projects may further pull domestic workers away from residential and commercial construction, intensifying the need to recruit internationally.

The industry cannot rely on a swift governmental solution to the labour shortage problem. Business leaders must take the initiative to attract migrant workers and create appealing career pathways for domestic workers. This requires competitive wage packages, clear development opportunities, and efforts to re-engage interest in trade careers.

Strategic adjustments for future success  

The 2024 BDO Construction Report reveals a complex landscape where profitability is improving, but companies continue to face major risks from subcontractor insolvency, supply chain disruptions, and workforce shortages. Companies must adopt proactive strategies, including tighter project selection, more rigorous subcontractor assessments, and workforce engagement, to sustain long-term growth.  

The construction sector is moving past the disruptions of COVID-19, but without a focus on these three key areas, future profitability gains could be hindered. BDO’s insights highlight the need for stronger risk management, strategic planning, and innovation in how companies handle subcontractors and workforce challenges, all of which are essential for navigating the evolving landscape of Australia’s construction industry.