Construction executives turn to digital technology to offset inflation

More than four in five (85%) construction executives in Europe expect the price of materials to rise over the next 18 months, according to a new report published by international law firm DLA Piper.

According to the study, which polled top construction executives in Europe, Asia Pacific, and the Middle East, more and more companies are turning to digital technologies to address supply and cost challenges.

In Europe, 47% of executives expect to significantly increase their investment in digital technology over the next two years, compared with 21% of executives in Asia and 12% in the Middle East.

Europe also leads in the adoption of emerging technologies, with 85% of executives integrating AI, robotics, and analytics software into project design processes, versus 64% in Asia and 45% in the Middle East.

Additionally, 79% of European executives have deployed AI technology to automate orders, payments, invoicing, and delivery tracking.

Securing non-fixed price contracts is one of the top priorities for 54% of European executives polled due to inflation concerns.

Energy price inflation is identified by 56% as the most significant challenge to their investment strategy, followed by geopolitical risks (51%), macroeconomic uncertainty (36%), and the tight labour market (33%).

Although 82% of European executives claim they are committed to reducing their carbon footprint across their operations and supply chains, only 32% consider their own organisation to be well prepared to reach Net Zero by 2050.

Richard Edwards, partner at DLA Piper, said: ‘The past two years have been challenging for the construction industry. Pandemic restrictions, volatile commodity prices and the Russian invasion of Ukraine have all created headwinds – particularly in Europe. Investment in technology is not a complete solution to the challenges facing the construction industry. But many executives are putting capital into technology to help manage, and streamline, complex procurement and supply chains. Technology is also providing more of the tools needed to meet sustainability commitments and capitalise on market opportunities. IoT applications, AI technology and analytics all aid in navigating logistics, easing cost pressures and ensure ESG compliance.’

Paul Giles, partner at DLA Piper, added: ‘This report illustrates the range of pressures being felt worldwide, including environmental impact and carbon reduction. The construction industry understands the role it can play tackling climate change. In Europe, the overwhelming majority of executives are committed to decarbonisation. But supply chain disruptions and rapid price inflation have created additional cost-pressures for executives already managing the additional cost of transitioning to Net Zero. At a time when executives are focused on maintaining competitiveness, industry-wide sustainability standards would encourage best practice longer term.’


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