Economic concerns remain, however foundations are being laid for future growth in New Zealand’s construction sector – BDO New Zealand Construction Sector Report
While diverging business performance trends are evident across sub-sectors and regions, the 2025 BDO New Zealand Construction Sector Report, entitled ‘Foundations for future growth’, reveals a range of common business performance metrics which construction business leaders nationally feel least positive about.
The seventh annual report, based on a nationwide survey of 196 New Zealand construction business owners and leaders during April - May 2025, shows that economic pressures continue to be the leading concern for construction business leaders.
Just 37% of respondents felt positive about economic factors (all or most of the time) in the two weeks prior to the survey, ranking it lowest among the 18 business performance metrics surveyed. Rounding out the top five issues are political factors, leveraging new technologies (including AI), business growth and cash flow – the latter two factors entering the top five for the first time in this year’s survey.
Just 45% of construction business leaders felt positive about their business growth in the two weeks before our survey, making this a priority issue for the first time in the report. More construction business leaders reported an increase in profit margins when compared with the 2024 report – perhaps signalling a turning point – however this group still represents only 31% of those surveyed.
“With tough economic conditions and an unsteady forward work position, achieving growth has been challenging for much of the construction sector recently - but there are signs of foundations being laid for future growth. The Government’s new Investment Boost initiative will likely incentivise some businesses to invest in productive assets to grow profitability, although strong pipelines of forward work remain essential for construction businesses to grow.”
Nick Innes-Jones, BDO Construction Sector Leader
Forward work falls back while staffing levels stabilise
Forward work remains a concern for construction business leaders. The Report shows that just 41% of survey respondents have sufficient confirmed work beyond 12 months - a slight decline from 2024 - and more than a quarter only have enough work to cover the next six months or less.
More positively, staffing levels seem to have stabilised, with business leaders no longer facing the severe labour shortages that were a feature of the industry in previous years. In the 2025 survey, most respondents (57%) say that current staff levels meet their needs, while just under a third expect to be actively looking for staff in the next 12 months. However, when asked what their greatest challenges or concerns are for the next year, many survey respondents mentioned staffing issues of some kind, including finding skilled senior workers, retaining staff and keeping morale high.
“It’s positive to see ongoing recruitment activity in the construction sector, with few layoffs reported in our survey. Many respondents still acknowledged staffing concerns, however, including a need for highly skilled and senior staff. For businesses to achieve growth as the market improves, staffing volumes and quality become more essential. Firms could use any down time they have currently to analyse their talent pool, upskill existing team members and understand what skills they might need to take the next step forward.”
Nick Innes-Jones, BDO Construction Sector Leader
Head contractors and civil/infrastructure fare best
Looking more closely at subsectors, the BDO Construction Sector Report shows that in general, head contractors and business leaders involved in civil/infrastructure projects are faring the best in the current conditions.
69% of business leaders working on civil/infrastructure projects are currently feeling positive about their overall business performance (all or most of the time), increasing to 77% when thinking about performance in six months’ time. This is significantly higher than the commercial and residential subsectors, where profit margins are tighter and there’s less forward work.
Meanwhile, head contractors are feeling more positive about their business performance than subcontractors and have a more comfortable forward work position.
The South Island stands out
Construction business leaders in Auckland and the rest of the North Island are the least positive regarding their overall business performance and are experiencing more challenges than other regions when it comes to profit margins and forward work.
Meanwhile, business leaders in the South Island are leading the way, reporting the strongest levels of positivity regarding their overall business performance (71%) – likely boosted by residential sector growth in major centres including Christchurch and Queenstown. This compares to 66% of Wellington/Wairarapa respondents feeling positive about their business performance, 53% in Auckland and 52% in the rest of the North Island.
“After last year’s market downturn, we’re now seeing different issues emerge for different parts of the sector. The labour market seems to have stabilised from 2024, with businesses now rightsizing and looking to consolidate, and certainly in Christchurch we’re observing more construction work in progress than this time last year. However, the picture in Auckland and other parts of the North Island is more concerning, and economic pressures are driving this. I’m hopeful we’re turning a corner, and indications are that we will see the market improve towards the latter part of 2025.”
Martin Veitch, BDO Construction Partner
About the report
BDO’s seventh edition of the BDO New Zealand Construction Sector Report is based on survey responses from a sample of 196 construction business owners and leaders in April-May 2025. 45% of survey respondents worked at businesses with more than 30 employees and 62% had an average annual turnover of $5 million+ over the past three years. The survey was conducted by an independent research agency. The report features insights across subsectors and regions, along with practical tips for construction business leaders. It also includes a video interview with BDO Construction Sector Leader, Nick Innes-Jones.