Civil Engineering Reference
In-Depth Information
Key Points 13.1
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National accounts measure the annual level of economic activity, and
economic growth is identified by changes in 'real' GDP.
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GDP represents the total money value of all production created within a
country during a year. GNI includes the income generated for the nationals
of that country by overseas activities.
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Per capita GDP is a broad measure of national income but it is less useful
as an indicator of the wellbeing of a society.
GDP AND CONSTRUCTION
Construction is a significant part of the total economy. In 2010, construction
in the narrowest sense of the definition produced about 7 per cent of UK GDP.
In comparison, manufacturing produced 16 per cent of GDP, while agriculture
accounted for just 1 per cent. The lion's share of economic activity fell into the
service category, which broadly defined includes the wholesale and retail sectors. In
2010, the service sector accounted for 76 per cent of GDP (ONS 2011c).
In newly developing countries, the construction sector can contribute as much as
15 to 20 per cent of GDP because it accounts for a significant amount of investment
during a country's development. As industrialisation proceeds, factories, offices,
infrastructure and houses are required and construction output as a percentage of
GDP reaches a peak. In other words, construction is responsible for the output of
buildings and infrastructure upon which most other economic activities depend.
Once an economy has developed, the demand for construction products, in
relative terms, declines and construction output as a percentage of GDP tapers off.
In an industrialised nation the building stock is well developed, so the need to add
to it is less. Much of the infrastructure and many of the buildings may be ageing, but
the requirement for new build work is generally smaller - however, there is likely
to be a far greater need for repair and maintenance work. Generally, therefore, the
higher the GDP per capita, the higher the proportion of repair and maintenance
work in the construction sector. This relationship is described by the Bon curve (see
Figure 1 of
Reading 5
, page 266).
Bon's analysis (1992) studied the entire path of development from the least
developed countries to those of an advanced industrialised status. The picture that
emerges is one in which the share of construction in gross domestic product tends
to increase with the level of per capita income during the early stages of economic
development. However, once a country reaches a certain level of development,
construction output, in relative terms, declines in relation to national output - that
is, it decreases relatively but not absolutely. Bon's analysis suggests that when a
certain level of development is achieved the share of construction activity will settle
at around 6 to 8 per cent of a country's GDP. Take China as an example, during
the first two decades of its reform era (1978-1999) as it emerged from being a less
