The Construction Industry
An introduction to the Construction Industry.
The Construction Industry
Standard Industrial Classification (SIC) 2003 categorises the construction industry as section F, which is midway through the categories of products and services available to consumers / businesses.
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Construction projects are unique for the following reasons:
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Industry has a low technology need – following established practices that require little advanced knowledge and inexpensive, readily available tools at base level.
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Projects are assembled from components. The pieces are bought in and are simply put together in order to achieve the desired build. This is both cost effective and efficient.
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Land is required. In order to provide the project, land is needed and so must be bought / secured beforehand.
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They offer large value products. Projects can be very expensive, and so are often offered on terms of credit or finance.
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Projects have a high initial cost.
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Once complete, projects will require ongoing maintenance.
Time frames in construction are extremely important, and can very dramatically between projects. It will depend on factors like complexity, location of the build, availability of labour or funds etc. Other things affected the time frame can be:
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Design. Everything must be designed and planned electronically on or paper before building can even begin. Then planning permission is required based on these drawings.
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Lead times. Waiting for orders can also cause delays.
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Finance. If finance in unavailable or hard to secure (especially in the current economic climate) then the construction may be delayed. Restrictions on the funds such as dated release of money can also delay.
Sectors and Work Types
There are various sectors within the construction industry, and these sectors take on different jobs with differing time scales and costs. Some sectors are:
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New work:
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Public Housing
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Private Housing
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Industrial
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Commercial
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Repair and Maintenance work
Type of work available can vary due to many factors, and this means that construction work can be cyclical and go through trends. Some factors affecting type of constuction work available are:
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Economic pressure
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Age of population
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Spending trends
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Tax variations
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Movements of people
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Cultures of people
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Supply and demand of other services
For example. If people have a lot of money in general, and can afford to buy more luxuries, then there will be a demand for more shops to be constructed, or more factories in which to produce the goods. However, if economic times are hard, and people have less confidence, then less spending will take place and so there will be less need for new constructions.
Immigration and movement of people, as well as introducing new cultures and an ageing population can affect the types of buildings that are needed. There could be a demand for more schools, retirement homes, youth centres, libraries or government offices etc.
Stereotypes within the construction industry
There is no ‘typical’ construction firm, however, people can have various misconceptions due to past experiences or stories from friends or family etc. There may be stories of cowboy or nightmare builders, workmen who ask for money up front and do not complete the work, shoddy work itself. They can also be unreliable or may not be paying any tax or might not be insured. There are no doubt some within the industry that do conduct their work in this manner, however this is not the same for every construction company.
Note:
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In 2002 there were 106000 complaints to trading standards concerning construction work.
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Insurance companies pay on average £1.5 billion per annum for remidials.
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An estimated £4 billion in revenue is lost each year due to the fear of construction companies and of the work going wrong.
Construction firm size also varies from company to company. There are many self employed builders who are the sole person within a company, and there a small number of companies with many thousands of workers. The majority of firms are Small Medium Enterprises (SME) and these are very numerous. This leads to high levels of competition for contracts, and brings prices for construction work lower. This however, means that many construction workers have low profit margins and must complete many jobs as quickly as possible to earn more money. This of course has implications for health and safety and the quality of work. Another problem is that consumers often have contracts with many SME’s. There could be the builder, plumber, electrician, designer, architect all for one job. This can create problems as a problem with one contact can delay work from others or cause problems for them.
Clients to the construction industry and it’s significance socially
There are many types of client that the construction industry may deal with when securing contracts for work. These can be:
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Individuals
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Businesses
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Public sectors
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Private sectors
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Domestic customers
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International customers
A good spread of clients keeps a construction firm’s portfolio fresh and active, and also helps it to ride the trends mentioned earlier. Therefore they will have a constant cash flow from one area of their clients, even if another is quiet.
The construction industry if very important to society for the following reasons:
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It produces 10% of the UK’s GDP
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It employs 1.4 million people
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It supports other industries (material suppliers etc.)
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Provides capital goods
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Helps produce and supply goods (by building factories and shops etc.)
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Provides social amenities
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Gives a ‘measure’ of the economy (good economy = more construction, bad economy = less construction)
There will always be a demand for the construction industry despite going through slow periods with less work. In the short term of less construction, many construction workers may choose to go self employed and in turn may go bankrupt. The construction firms themselves may go into liquidation if they cannot secure enough work. However, when the economy picks up again, the demand for construction workers will increase again.
One thing to point out is that death and injuries can and will occur in construction. In fact, out of all industries, construction has the highest chance for death and injury out of all sectors. This can be due to the training levels of smaller companies that cannot afford to have training arms of their busineeses.
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