Signs of resilience building in NZ construction sector amid continued economic and political uncertainty – BDO New Zealand Construction Sector Report

MEDIA RELEASE: EMBARGOED UNTIL 25 JUNE 2026

DATE: 22 June 2026

BDO New Zealand’s eighth annual study of key business performance trends among local construction sector firms, highlights overall business performance sentiment has softened year-on-year, with just over half of construction business leaders positive about their current performance, and expectations for the next six months remaining cautious.

Based on a nationwide survey of 180 New Zealand construction business owners and leaders during April–May, the 2026 BDO Construction Sector Report reveals that economic and political factors continue to be the leading concerns for construction business leaders; hindering sector investment, recruitment and growth plans.

Even so, there are signs of resilience emerging. More than three quarters of construction businesses have sufficient confirmed work for at least the next six months, many report stable or improving margins over the past year and labour supply does not appear to be an immediate constraint - with 57% reporting that current staff levels meet their needs and more than half being confident they can fill vacancies over the next year. 

“It is encouraging that construction businesses continue to feel they have adequate labour supply to meet current needs, particularly given recent migration trends to Australia. The real test will come if pipelines strengthen and construction activity lifts, especially off the back of public infrastructure investment signalled in Budget 2026. Current labour supply confidence is positive, but it will need to hold as demand builds.” - 
Nick Innes-Jones, BDO Construction Sector Leader

Construction firms navigate a challenging 12 months

Continued economic and political uncertainty has led to many firms facing another tough 12 months since BDO’s 2025 survey. In the past year, close to two-thirds of construction businesses surveyed have had projects cancelled or put on hold, nearly two-thirds have incurred losses of up to $100,000 and a quarter have witnessed a counterparty go into liquidation.

Margin pressure is a major theme. Seven in ten construction business leaders expect fuel price inflation to impact net profit margins during the next 12 months. Similarly, around seven in ten expect input costs to rise over the next year, higher than the average for businesses surveyed across all sectors in the May 2026 BDO Business Performance Index.

At the same time, work is being won in a competitive, tender-led, price-led market, meaning some businesses are staying busy without rebuilding profitability. While most construction businesses have near-term work secured, with 76% reporting sufficient confirmed work for more than six months, this pipeline is not translating into stronger positivity around future profitability. 28% of businesses report increased gross profit margins over the past 12 months, yet only 23% expect margins to improve over the year ahead and 32% expect margins to decline. The results point to a sector that is not bracing for a further sharp downturn but remains cautious about whether the work ahead can deliver sustainable margins.

Regions and sub sectors face diverging business performance

Regionally, the picture is mixed. South Island businesses report the strongest confirmed work position, followed by Auckland businesses. Businesses in the rest of the North Island show stronger current business performance sentiment and hiring intentions, but business leaders here are the only to report lower positivity with business performance in six months’ time.

Civil and infrastructure firms are more positive regarding their current business performance when compared to those firms operating in commercial and residential sub sectors. Their forward work position is also the strongest across sub sectors and they are the most optimistic about profit margin growth, with 28% expecting gross profit margins to increase over the next 12 months. 

Significantly fewer commercial and residential firms expect gross profit margins to increase in the next 12 months. This suggests competitive tendering, cost escalation, scope changes and client affordability are still weighing on profitability. 

Subcontractors report a significant drop in business performance positivity, pointing to the sharp pressures this part of the sector is facing. Subcontractors often enter the building process later than head contractors and are more exposed to timing changes, retentions, variation disputes and payment delays. Most subcontractor respondents reported annual turnover below $10 million, suggesting many are smaller operators with less capacity to absorb volatility.

“The year ahead is unlikely to be defined by a simple recovery story. Construction businesses may have work ahead, but profitability, cash flow and risk management will determine how successfully they navigate the next phase. Leaders who maintain pricing discipline, monitor project performance closely and manage counterparty exposure will be best placed to convert pipeline into sustainable performance. The sector may not be out of the woods, but businesses that protect margin, manage risk and make clear, disciplined decisions will be best placed to move from resilience to recovery.” - Nick Innes-Jones, BDO Construction Sector Leader

About the report

BDO’s eighth edition of the BDO New Zealand Construction Sector Report is based on survey responses from a sample of 180 construction business owners and leaders in April-May 2026. 54% of survey respondents worked at businesses with more than 30 employees and 65% 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 sub sectors and regions, along with practical tips for construction business leaders. It also includes a video overview from BDO National Construction Sector Leader, Nick Innes-Jones.