The construction industry contributes a tenth of the UK’s total gross domestic product (GDP). Additionally, the industry employs over 1.4 million people and thus can be ranked as one of the labor-intensive industries in the UK economy. The industry contributes significantly to the economic growth and development in the UK, considering its employment capacity.
Moreover, it consists of over 250,000 firms that deal with similar but differentiated tasks. Among the roles that the industry undertakes include producing and supplying construction materials, building services, construction designs, and consultation services. For quite some time now, the industry has been dominated by a lot of innovations that have significantly raised the quality of houses and roads in the UK. The construction industry has an inelastic demand, meaning that a unit change in price may lead to a greater change in the construction products demand. However, the high profitability level in the industry has greatly enhanced its growth and expansion in the UK market.
The real estate business, which majors in establishing rental and residential houses for sale and investment purposes, had really expanded its operations before the 2007 economic recession. Due to the increased demand for houses in the UK market, the construction industry was forced to employ more people and import more construction machines in order to speed up the tasks. Basically, the financial institutions were among the major clients of the industry, which demanded more than half of the real estate.
The UK government also led to the growth and expansion of the industry as it advocated for the upgrading of all the public building projects. Among the projects that were proposed included hospitals, prisons, roads, and schools. The government also mandated the large construction firms to specifically design, construct and manage the projects. The government, therefore, leased the buildings for public use from the private consortium, and since the private consortium mainly used their own finances in undertaking the projects, the government was supposed to pay the amount plus the interest. However, the contract allowed a gradual repayment of the amount, a move that made it possible for the government.
The house building in the last decade has taken a significant proportion of activities in the constructions industry. The sector contributes 38% of the overall activities that the industry performs throughout Britain. Although the UK government has continuously maintained its £2 billion expenditure, the private sector has more than tripled its investment in the housing sector. The exemption of new homes in the sale of goods Act also significantly increased the demand.
The individual firms and government activities, therefore, increased the demand for real estate in the UK, which was further translated to increased production in the industry. More firms and improved technology were adopted in the venture in order to sufficiently meet the rising demand. The employment level also greatly rose as the industry assimilated a huge number of people who provided technical and manual services to the firms. The high and quick returns in the real estate investments attracted the financial institutions, making them invest a huge proportion of their client’s amount. The move enabled many of these institutions to significantly expand and operate at a profitable level.