1.1 Industry Overview
The construction industry is a generic term for a service industry forming part of the nationâs economy that carries out the planning, designing, constructing, altering, refurbishing, maintaining, repairing and demolition of structures. It is a large dynamic and complex industry that plays an important role in the economy of which there are three sectors, that is, buildings, infrastructure and industrial. Building construction can be subdivided into two groups, residential and nonâresidential. The former requires no elaboration, while the latter encompasses commercial, institutional and governmentâowned/leased projects covering a range of building types such as hotels, banks, schools and hospitals. Infrastructure refers to highway and civil engineering structures, including large public works such as motorways, bridges and other transportation networks, utility distribution and water/wastewater treatment. Industrial includes chemical processing plants, warehouses, factories, power generation facilities, manufacturing plants and mills. The construction process commences with a planning stage stemming from early designs and includes financing and developing the designs for working purposes. This continues with a construction phase until the project is complete, which triggers the occupational phase when the building is operated as its intended use.
1.1.1 The British Construction Industry
The demand for new buildings and the refurbishment of existing is driven by available spending in the public and private sectors. Because of this, the construction industry is buoyant in terms of the demands it must meet, yet is susceptible to the mood of local economies and the national economy as a whole at any time. According to a House of Commons Briefing Paper entitled Construction industry: statistics and policy published during Q4 of 2015, the British construction industry amassed ÂŁ103 billion in economic output during 2014. This represents 6.5% of the gross value added (GVA), which is the construction industryâs economic contribution to the total value of the national accounts. The briefing paper advises that employment in the industry grew at a steady pace since 2010, with 2.11 million jobs filled during 2015. The paper predicts that a decade of future economic growth lies ahead based on the (then) coalition governmentâs report Construction 2025, which was published during Q3 2013 and prepared from the guidance and support of the Construction Industrial Strategy Advisory Council (CISAC), an advisory body comprising members that seek, construct and issue advice on buildings and infrastructure. This report predicts world economic output will grow at a rate of 4.3% per annum through to 2025, which will create changes in the international economy and provide new opportunities for the United Kingdom. To embrace these opportunities and be well placed domestically, the government has pledged to work with a range of industrial bodies with end goals for 2025 that aim to:
- reduce the initial cost of construction and whole life asset cost by oneâthird (2009/2010 levels);
- reduce by half the overall time it takes to acquire new/refurbished buildings from inception to completion (2013 industrial outputs);
- reduce by half greenhouse gas emissions in the built environment (based on 1990 levels); and
- reduce by half the trade gap between imports and exports for construction products and materials (based on a trade deficit of ÂŁ6 billion in 2013).
With such challenges ahead, the industry must be ready for change and is indeed a giant in terms of the contribution it makes to the nationâs economy which creates room for interesting careers and job security in the process.
1.1.2 Equal Opportunities and Diversity
The UK is a diverse society comprising people from multicultural and multilingual backgrounds, where everyone has something different to bring to society and the workplace. The construction industry is one that requires a variety of skills and abilities to function, which means it is important for people from different backgrounds, life experiences and abilities to be suitably employed to enable the industry to achieve the high levels of skills and deliverables needed. For this reason, employers, unions, service providers, service users and industrial bodies are encouraged to endorse integration regardless of age, disability, gender reassignment, marriage or civil partnership, pregnancy and maternity, race, religion and beliefs, gender, sexual orientation or socioâeconomic background. This requirement is also legislated under UK labour law with the Equality Act 2010 applicable in England and Wales and, in part, Scotland and Northern Ireland. The Act makes it illegal to discriminate against access to education, public services, private goods and services or premises and employment opportunities. Hailed by lawyers as the most significant development of equality legislation in decades, the Act harmonises and consolidates previous antiâdiscrimination legislation, and strengthens legal rights to equality. The Actâs purpose was to replace a mass of disjointed legislation with more uniform, accessible and comprehensive rights. Following its introduction, it has succeeded in setting standards and raising awareness of rights to equality, as well as tackling discrimination and, in particular, the role of the public sector with regards achieving equality.
1.1.3 Global Construction
In a report entitled Global Construction 2030 published by Global Perspectives Ltd during Q4 2015, the global construction market is expected to grow by an average of 3.9% per annum from 2015 through to 2030. This is comparable to the 4.3% prediction through to 2025 advised in the UK Governmentâs report Construction 2025. According to Global Construction 2030, cumulative growth through to 2030 will surpass global domestic product (GDP) (the construction industryâs economic contribution to the total value of a nationâs accounts including taxes less subsidies) by oneâquarter. This is primarily due to developed countries continuing to gather pace following a sustained period of economic stability, and the ongoing confidence of developing countries with industrialisation and reform. China is expected to be the largest construction market for most of the period, anticipated to level off by 2030, with the United States growing at a faster rate in second place with the financial gap narrowing during the period. Indiaâs economy is expected to surpass that of Japan to become the thirdâlargest construction market by 2021, with the top three accounting for 57% of all growth. It is predicted that Japanâs role will be notched down to fourth place by 2030 to be taken over by Indonesia.
For cultural reasons, countries tend to rely on homeâgrown companies to design, manage and construct projects with their residents/citizens incentivised under labour law to carry out services. This varies from country to country and region to region, and even with the local market tested, it is still possible for skill shortages to affect the servicing of projects. This is appeased with globalisation and the services of international recruitment and construction companies that seek candidates for project employers in host countries. The selection and suitability of such candidates can be endorsed with experience, qualifications and membership of trade and/or professional institutions that have reciprocal agreements with their counterparts in other countries, meaning the status can be obtained in more than one country at the same time.
Foreign recruitment and the investment in overseas schemes can lead to the expansion of a business and the opening of overseas branches. The integration of a new business with the construction industry of another country is indeed a challenge, and one that requires commitment to time and resources. A risk management strategy is therefore vital, which must be created by any business wishing to diversify its interests meaning the impact of the investment must be fully understood prior to making commitments. When appraising the possibilities for starting an overseas construction business, the investor must have an understanding of risks associated with any of the following:
- the need to invest, competition expected and the likelihood of securing contracts;
- referral from others that may have already ventured into the locality and their results;
- anticipated duration of the overseas investment (i.e. shortâ or longâterm or permanent);
- financial stability of the overseas country;
- financial stability of the home country and foreseeable trends (e.g. currency exchange rates, existence of double taxation treaties, changes in legislation and tax breaks);
- performance of competitors on completed projects (i.e. what is normal and the quality expected);
- trade unions and their influence;
- health, safety and environmental attitudes;
- availability of suitable labour skills and material resources;
- political stability;
- cultural working practices;
- existence of corruption;
- legislation with regards planning at local and national level;
- existing industrial relations and building control;
- land and terrain;
- sources and status of infrastructure and utility service providers;
- terrorism and militants;
- communication methods, including any potential language barriers;
- climate and volatility of the scheme to natural disasters (i.e. earthquakes, hurricanes, etc.);
- decision to rent or purchase office space, including setâup costs and the need for financial loans;
- time involved to register the company and/or the need for sponsors;
- business development potential (time and money);
- relationship with local and central government regarding trade and employment restric...
