After several years of economic turbulence, cost escalation and market disruption, New Zealand’s construction sector is showing resilience, even as profitability remains under pressure. The 2026 BDO Construction Sector Report shows a sector that is cautious, with business performance sentiment softening year-on-year and many businesses focused on converting secured work into sustainable margins.
Based on a nationwide survey of 180 construction business owners and leaders, conducted in April and May 2026, the report points to a sector under pressure, but not bracing for a further sharp downturn.
Work is available, but margins remain tight
Work remains available. More than three-quarters of businesses surveyed have sufficient confirmed work for at least six months. However, pipeline visibility is not yet translating into stronger profit expectations. While 28% reported increased gross profit margins over the past 12 months, only 23% expect margins to improve over the year ahead and 32% expect them to decline.
For construction leaders, the focus is shifting from winning work to delivering projects profitably in a competitive, price-led tender environment.
“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,” says Nick Innes-Jones, BDO National Construction Sector Leader.
“Hawke’s Bay is a good example of this. Strong activity across residential building, commercial developments and infrastructure projects reflects the region’s resilience and growth. With opportunities continuing to emerge, businesses with sound project and financial management are well positioned for success,” says Emma Cook, Advisory Partner, BDO Hawke’s Bay.
Discipline will define recovery
Cost pressure remains a defining challenge. Around seven in ten construction business leaders expect fuel price inflation to impact net profit margins over the next 12 months, and a similar proportion expect input costs to rise. Together with uncertainty around demand, working capital and financing conditions, this is creating a constrained operating environment.
The strongest businesses are responding by strengthening financial discipline, improving operational efficiency and managing risk more deliberately. This includes pricing risk carefully, monitoring project performance in real time, and managing cash flow and counterparty exposure.
Positivity remains strongest in areas businesses can directly influence, including risk management, compliance, employee motivation, technology performance and operational systems.
Technology offers a practical productivity lever
Technology and AI are also emerging as practical tools to reduce administration, improve job costing and reporting, strengthen project visibility and support better decision-making.
Workforce stability supports future growth
Labour shortages have been a major challenge in recent years, but workforce pressure is not the most immediate constraint. More than half of respondents (57%), say current staffing levels meet their needs, while only a small proportion expect layoffs. Close to one-third are actively looking for staff, suggesting businesses are maintaining capability so they can respond when conditions improve.
Public infrastructure investment could stimulate activity, particularly for civil and infrastructure firms, but the timing of project releases and the ability to scale labour supply will be critical.
Resilience today, recovery tomorrow
The report confirms that construction businesses continue to face real challenges. Economic and political uncertainty, cost pressure, cash flow constraints and profitability concerns are weighing on leaders. However, the findings also reveal resilience through confirmed pipelines, workforce stability, disciplined management and growing interest in technology.
Recovery may not be immediate or evenly felt. Civil and infrastructure firms appear better positioned due to stronger pipeline visibility, while commercial, residential and subcontractor businesses continue to face sharper margin and timing pressures.
For construction leaders, the priority is clear: maintain pricing discipline, invest in people capability, use technology where it creates practical value and manage risk before pressure builds.
“Hawke’s Bay has every reason to be confident about its future. Continued residential growth in Havelock and Napier, investment in commercial development and transformational infrastructure projects throughout the region are creating diverse pipeline of work that will benefit the region for years to come. For local construction businesses, the focus must be on delivering this work efficiently and profitably to support sustainable growth,” says Lisa Townshend, Advisory Partner, BDO Hawke’s Bay.
Authors – Lisa Townshend & Emma Cook – BDO Hawke’s Bay Advisory Partners
