Industry Outlook

Engineering Business Sentiment - the Current and Future State of our Industry

ACEC now conducts a bi-annual Engineering Business Sentiment Survey that captures the outlook of firm executives and industry leaders. This survey explores their perspectives on their firm’s financial health, optimism for the engineering and design services industry, and their views on the overall condition of the Canadian economy.

The survey, conducted in partnership with the ACEC Research Institute - the research division of the American Council of Engineering Companies - provides valuable context to the economic data published annually by ACEC, offering a clearer picture of our industry's current state and future direction. By analyzing these findings, ACEC produces reports that deliver actionable insights into current and emerging business conditions and key trends shaping consulting engineering firms across Canada.

The Engineering Business Sentiment report is a critical tool for understanding the industry's opportunities and challenges, helping firms navigate a rapidly evolving landscape.

Key findings from the latest survey:

Current Business Conditions

• Current sentiment is positive. The Net Ratings for the firm’s finances (+88) and for industry (+71) are high. The Net Rating for the Canadian economy is +31.
• Optimism about the Canadian economy fell by six points compared to earlier this year. It fell four points regarding the condition of the industry but fell by only one point for the firm’s finances.
• The Net Rating declined in most sectors compared to the first half of 2024. However, current sentiment remains very optimistic within all market sectors. Sentiment is strongest in Water/Wastewater (+79) and Roads & Bridges (+76).
  While still positive, current sentiment is relatively lower in the Education (+48), Government Buildings (+46) and Commercial Real Estate (+36) sectors.
• Sixty-one percent indicate their firm has a current backlog of less than a year. The median decreased from 9 months to 8 months.
• Eighty-seven percent of firms have at least one opening, down two percentage points from the first half of 2024. The median number of open positions is six, down from 10 in H1 2024.
• On average, 5 percent of positions remain unfilled, down from 8 percent in H1 2024.

Future Business Conditions

• Future sentiment is positive for the firm’s finances (+30) and the industry (+8), but respondents remain less enthusiastic about the future of the Canadian economy (-2).
• Future sentiment fell by 7 points for the firm’s finances but was largely unchanged for the industry and the Canadian economy.
• General economic uncertainty (70 percent) and political environment/uncertainty (67 percent) are fueling negative future sentiment. Concerns about inflation, interest rates and workforce shortages have eased considerably since earlier this year while recession concerns increased.
• Future industry sentiment is positive in all sectors; however, two-thirds of sectors saw declines in future sentiment compared to the first half of 2024. It is highest in Energy and Utilities (+36) and Roads and Bridges (+28). Future sentiment is weakest in Government Buildings (Net Rating +7) and Convention Centers, Sports Facilities and Cultural Facilities (+4).
• Half of firm executives (50 percent) believe their firms will see a higher backlog of projects 12 months from now, down just one point from H1 2024.
• Sixty-nine percent predict there will be an increase in hiring over the next 12 months, down from 74 percent in the first half of 2024. The resulting Net Rating declined four points to +66.
• Thirty-eight percent of firm executives agree they are extremely concerned about the impact of inflation on their firm; however, inflation concerns overall have moderated with the Net Rating falling from +27 in H1 2024 to +4 in H2 2024.
• The likelihood of recession in the next six months is 43 percent according to the average estimate among firm leaders. This is unchanged from the first half of 2024.

Hot Topics

•  A majority of firm executives indicate they are either experimenting with the use of AI in pilot projects (37 percent) or are using limited implementation across multiple projects (32 percent). No firms have fully integrated AI into projects.
• A majority of firms who are using AI are doing so for data analysis and reporting (58 percent), while nearly half (48 percent) are using AI for marketing and business development.
• The vast majority of firm executives (84 percent) believe that AI will bring increased efficiency and productivity to the industry. In addition, nearly half (46 percent) believe AI will result in cost savings.
• There are a variety of risks inherent with AI according to firm executives. These include reliability and accuracy (72 percent), data privacy and security (63 percent) and ethical and regulatory challenges (57 percent).
• A plurality of firm executives (40 percent) is not yet sure how they will monetize the use of AI. Another 18 percent say they will not change their billing structure.