Engineering & Construction

The Engineering & Construction (E&C) industry is a foundational sector involved in the design, planning, construction, and management of infrastructure projects. It is capital-intensive, employs a large workforce, and is sensitive to economic fluctuations, playing a crucial role in economic growth and job creation.

The E&C industry is influenced by economic indicators like interest rates, inflation, and GDP growth. Government investments, such as the IIJA, IRA, and CHIPS Act, drive growth in infrastructure, manufacturing, and energy projects. Technological advancements like BIM, digital twins, and AI are streamlining project management and improving efficiency. Regulatory changes promoting sustainability and clean energy are also shaping the industry, driving the adoption of green building techniques.

The E&C industry includes large multinational corporations and specialized firms, with a combined market capitalization of over $304 billion and total revenue of $190.62 billion across 51 listed stocks. Major players like Quanta Services, EMCOR Group, and Jacobs Solutions Inc. compete on scale, expertise, and technological innovation. There is a growing trend towards risk-sharing models to mitigate project failures, and larger issuers with established solutions have a competitive edge.

In the first half of 2024, the construction industry showed strong fundamentals with increased value added and gross output, and construction spending exceeding US$2 trillion. Employment levels reached 8.3 million in July 2024, despite a talent shortage. The Dodge Momentum Index indicated growing market confidence. The outlook for 2025 and 2026 is optimistic, with global construction output expected to increase. Decreasing interest rates and government investments are expected to boost demand. Data center construction is also expected to gain momentum. Challenges like labor shortages and high indebtedness are expected to persist, but technology adoption and sustainability are crucial for future growth.

The E&C industry is sensitive to economic cycles, with demand fluctuating based on government spending and private investment. High interest rates and inflation increase borrowing costs and material prices. A talent and skilled labor shortage remains a key concern, leading to rising wage costs. Supply chain disruptions and commodity price volatility can cause project delays and cost overruns. Complex project risks, particularly with fixed-price contracts, place the burden of cost overruns on contractors. Regulatory changes and geopolitical factors can also impact costs and supply chains. Cybersecurity risks are growing due to increased reliance on digital tools.