UK CONSTRUCTION

UK Construction



UK Construction

Introduction

The construction industry is a vital component of every OECD economy. The construction sector is responsible for building new houses, apartments, factories, offices and schools. It also builds roads, bridges, ports, railroads, sewers and tunnels, among many other things. In addition, it maintains and repairs all of those structures and produces the basic materials such as concrete that are used to make them. The industry's significance is due not only to the fact that it provides the buildings and infrastructure on which virtually every other sector depends, but to the fact that it is such a sizeable sector in its own right. The construction industry is Europe's largest industrial employer, accounting for about seven percent of total employment, and in the EU, the US and Japan combined, it employs more than 40 million people. Among all OECD countries, the construction industry accounts for an average of 6.47 percent of GDP.(Robert,1993, 13)

Discussion

Taken as a whole, the industry appears to be overwhelmingly made up of small, local firms with fewer than 20 employees. These firms produce most of the industry's output. On the other hand, the importance of the relatively small number of large firms cannot be underestimated. Their employees tend to produce a disproportionately high percentage of industry output. Because of the very large number of small firms, the entire industry is often characterized as unconcentrated. That description is too broad, however, because not all construction companies do overlapping work and some segments are much less fragmented than others. For example, a limited number of general contractors are capable of managing the very large projects, whereas there are a great many small subcontractors. Competition among large general contractors and among specialty firms seems to be oligopolistic, while rivalry among small contractors who do basic labour tends to be closer to perfect competition. Furthermore, different types of firms can serve very different functions and so may have more of a vertical relationship than a horizontal one.

(Robert,1993, 14)

The construction industry has acquired a certain degree of notoriety in many jurisdictions, where it is well-known that the sector has long been subject to cartel activities. Lord Borrie, former Director General of Fair Trading in the UK, once said that construction has the worst record of cartelisation of any industry. Despite an international trend toward harsher penalties against hard-core cartels in general and many successful prosecutions against construction firms ...