Construction sector’s margins still squeezed despite infrastructure spending boost

Foreign worker levies to rise again in 2016 and 2017.

The construction sector will continue to suffer weaker margins in spite of the government’s massive infrastructure spending boost, a report by DBS revealed.

Although infrastructure projects such as the Tuas megaport and Changi Airport's new Terminal 5 will support future project pipeline, competitive tender prices and higher labour cost structure going forward will keep margins muted.

DBS noted that though the increase in foreign workers’ levy has been deferred this year, the levies are still set to rise in 2016 and 2017.

“Firms are encouraged to upgrade lower skilled workers into skilled workers. Lower skilled foreign worker (R2) levies will increase with no change to levies on higher skilled (R1) workers through 2017. These measures will continue to put cost pressures on labour costs; and at the same time influence investment decisions in adopting new technologies to boost productivity,” stated DBS.