How the construction sector achieves resilience amidst uncertainty

The construction industry's global nature makes it particularly vulnerable to these trade policy shifts. As one of the most internationally integrated sectors, dominated by a few large players working across borders, construction depends heavily on complex, granular supply chains and imports. This reality is now translating into tangible financial pressures; data from the NAHB/Wells Fargo Housing Market Index (HMI) April 2025 survey, for example, reveals that builders estimate a typical cost effect from recent tariff actions at $10,900 per home.

However, the immediate impact on project costs is hard to evaluate and has probably been less material than what could be expected. When it occurred on some specific significant purchases, it may have largely been absorbed with the inherent risks integrated in the budgets for unforeseen challenges. Construction firms are no stranger to this dynamic, long accustomed to accounting for to-be-realised line items and challenges in their budgeting. Price revision clauses are also usually integrated in signed contracts which could help construction companies to not fully bear the impact of trade policy shifts. New contracts signed from now on will surely integrate this new dynamic.

That said, the sector's approach to baseline cost definition, critical for a proper pricing, investment decisions and timeline establishment, is becoming increasingly challenging to set up. The construction industry has always been good at weathering unexpected storms, but the number and types of those storms are growing and diversifying while client and investor concerns require increasing innovation and strategic planning to address. Geopolitics is becoming a key driver for considering doing business.

Market pressures and supply chain adaptation

The most immediate pressures are being felt in materials pricing. Materials scarcity and an over-reliance on imports, often from a single primary source, can create huge supply chain risk, forming vulnerabilities in budgets and timelines. This dynamic is compelling construction firms to fundamentally rethink their sourcing strategies and strengthen logistical channels, including increased domestic production.

Interestingly, this challenge is simultaneously driving sustainability initiatives. The imperative to reduce supply chain risk is converging with green funding opportunities and regulatory pressures, helping to create a compelling business case for more sustainable approaches. Construction companies are finding that domestic sourcing not only improves sustainability metrics but also reduces exposure to international trade disruptions.

Beyond materials costs, the industry faces compounding pressures in labour markets. Not only is the construction industry largely staffed by immigrant workers, but it is common in the industry to relocate teams of skilled labourers internationally to contribute to projects that require specific expertise.

Finally, fluctuating borrowing costs can create funding challenges. In some instances, investment may stall as a result, but in many cases, these changes result in less favourable interest rates, particularly for those whose strategies demonstrate less confidence.

Shared risk management and industry innovation

Despite these headwinds, the construction industry is demonstrating remarkable adaptability. Successful firms are implementing sophisticated risk-sharing mechanisms, both as a way of mitigating individual risk and as a means to securing investment and favourable interest rates through demonstrating adaptability. It is becoming increasingly common for businesses to limit their scope in order to decrease risk, partnering with other businesses with complimentary risk profiles. Whilst these arrangements can create new dependencies and require more intensive management coordination, they can reduce individual exposure. Contract management and protective clauses have also become increasingly critical tools, especially in these more collaborative and dependent arrangements.

Contract management is one of the most important resilience measures firms can implement. To reduce exposure, the way to design clauses included in a contract is key, along with sustaining a collaborative and constructive relationship with the client, keeping in mind that the goal is the same: to build something.

Blandine Rolland Partner

The regulatory environment adds another dimension of complexity. Construction operates under constant, granular regulations at country, city, departmental and regional levels, covering everything from building codes to materials specifications and supply chain requirements.

Whilst other industries are straining under the burden of managing disparate regulatory requirements and compliance strategies, construction is adapting well. This regulatory density also provides opportunities, particularly around recycled materials regulations that can help clients understand the value proposition and quality of sustainable alternatives.

Optimism amidst uncertainty

Despite poor outlooks over the past five years, financial results have globally improved year-on-year. This resilience stems from better diversification strategies, streamlined cost baselines and more careful project selection based on risk assessment.

The track record of adaptability within the industry is building confidence. Construction professionals understand that volatility is inherent to their sector and successful firms are those that can think differently and demonstrate resilience. Domestic sourcing and supply chain security are emerging as key competitive advantages, representing opportunities for forward-thinking organisations. As materials scarcity and supply chain challenges continue to present themselves, construction can continue to lead the market in matters of sustainability and localisation, building the future one project at a time.