Billd’s National Subcontractor Market Report survey showed that materials and labor cost subcontractors $97 billion more than expected last year, according to Zachary Phillips of Construction Dive. Billd is a construction financial support company based in Austin, Texas.
The survey results, which were published this month, found that revenue growth was seen in 61 percent of businesses and lower profitability was seen by 57 percent. Many subcontractors had to wait an average of 74 days after purchasing materials and labor to be paid since there were not enough funds to receive payment and buy materials.
A large number of businesses expect growth in 2023, even though 25 percent reported challenges with financing and input costs.
“The financial burden of material and labor has always been difficult to quantify, the full extent a bit hazy,” the report said. “Knowing that subcontractors spent an extra $97 billion almost feels like putting a face to a name. For some, it’s the missing cushion in their profit margins. It represents 97 billion instances of subcontractors financing the entire industry, all while navigating uncertainty in their payment cycles and subpar access to capital.”
The amount of money used for materials and labor was higher than in 2021, even when including inflation.
For the second consecutive year, the survey showed a profitability reduction, with 33 percent of subcontractors saying that bids did not increase by the same amount as labor or material prices.
According to the survey, 87 percent of subcontractors had to bear the expense for labor on their own before being paid, and the average price of labor increased by 15 percent. This is a common pattern in Billd’s subcontractor surveys, and it will continue to be an issue.
Approximately 50 percent of subcontractors reported their business’ biggest risk this year as not having enough skilled labor and 80 percent predicted that volatile business would affect their company this year. Further, 66 percent of subcontractors answered that the cost of volatile business unfavorably influenced their company last year.
There is some enthusiasm, however. According to the survey, over 50 percent of subcontractors reported 1-20 percent business growth in 2022, leading many to seek bigger 2023 projects.
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