Civil Engineering Reference
In-Depth Information
13
The Economy and Construction:
Measurement and Manipulation
The construction industry is an important focus of government policy. This is largely
due to the recognition of the importance of construction to national economies.
Broadly defined, the construction industry - including manufacturers of building
products, equipment and components, and the various professional services
provided by architects, surveyors, engineers and property managers - typically
accounts for about 15-16 per cent of total annual economic activity. (You may
remember that we compared broad and narrow definitions of construction activity
in
Chapter 1;
and it may be useful to review
Key Points 1.3.)
Official statistics, however, generally tend to restrict the construction sector
to the narrower definition of the industry, estimating the activity of firms that
construct and maintain buildings and infrastructure - that is, just those businesses
that undertake on-site activities. Consequently, the share of total annual economic
activity attributed to construction by the official statistics in the fully industrialised
countries is now rarely larger than 12 per cent and usually in the 7-10 per cent
range. In the 27 countries of the European Union, the construction sector accounted
for 9.6 per cent of economic activity on average in 2011. Note though, as we
explained in
Chapter 12
(see
Key Points 12.3)
, that construction output tends to
decline as a proportion of a country's GDP as its economy matures.
Apart from the industry's contribution to the total economic flow, it also has
a significant impact on living standards and on the capability of society to produce
other goods and services. In other words, construction is important to the economy
because it produces investment goods. These are products that are not wanted for
their own sake, but on account of the goods and services that they can create. Across
the 27 member states of the European Union, construction counts for 51.5 per cent
of all investment goods. Construction also can have extremely significant effects on
the level of employment as it tends to be more labour intensive than other sectors.
In fact, in Europe construction is the largest industrial employer, representing nearly
15 million jobs. (All statistics are taken from the European Construction Industry
Federation, FIEC 2012.)
In this chapter we explore the relationships between the construction industry,
other sectors and the national economy. As the contrast between the broad and
narrow definitions of the industry illustrates, there are many sectors closely
associated with construction activity. A case can also be made that construction
indirectly affects and supports activities in the financial, manufacturing, wholesale,
retail, residential and service sectors. Consequently, data for construction-related
activities is frequently muddled into manufacturing and service industry surveys.
These direct and indirect relationships have important implications for management
of the macroeconomy and their analysis is facilitated by the annual publication of
national income accounts, often referred to simply as the
national accounts
.
