The construction industry across numerous countries is beginning to show signs that it’s running out of steam. For the last decade, the industry has seen a boom. The latest stats released this month though are very worrying. Growth has slowed considerably, and although it’s not yet in reverse, the signs aren’t good for the future of the industry.
The biggest impact has been on housebuilding. A number of factors have led to fewer houses being built in the past year, causing profits and productivity to slump. There are many reasons why this has happened. Firstly, there is a lack of both private and public investment in the construction industry. Falling private investment can be explained by a lack of confidence in the economy as whole as GDP across the world grows only very slightly. Whereas public investment seems like it will continue to fall as austerity continues. Other problems like a lack of skilled workers are also contributing to the problem.
This is not just about the construction industry though. This is also beginning to affect ordinary people who want to buy a home. When house building falls, supply also falls meaning that demand can’t be met. This inevitably pushes up house prices for ordinary people. So, it’s in everybody’s interests that the construction industry finds its feet again and returns to strong growth figures.
How Can the Problem Be Solved?
The removal of obstacles should see house building increase at least in the short-term. That means getting rid of regulation and extensive planning procedures that slow down the building of new homes. Freeing up more of the green spaces that are available to build on might also make an impact. This is something that is unlikely to happen without a fight from the public though. But few people think that this will be enough to sort out the problem of declining growth in the long-term.
Cutting costs for businesses has been suggested as another way to return to growth, but this might not be possible. For a start, a lack of skilled workers, not too many of them, is one of the reasons why growth is slowing down. And it’s hard to see how materials can be bought more cheaply. Most of the big firms buy in bulk, and the prices are as low as they’ve always been. The costs of buying materials from a bearing manufacturer are not up either, and these kinds of items are essential. Machinery needs to be kept in safe, usable condition at all times.
Many people argue that the only way to really return to growth is to invest more in the industry. Public investment for the past 100 years or so has been the main way in which house building has been funded. In the post-war period, vast amounts of homes were built with public money. But if we’re going to return to those days of increased house building, the economic focus on austerity and cutting public funds will have to dropped. It’s becoming increasingly clear that the public sector shortfall is not being compensated for by the private sector. So, public spending looks the only safe bet at the moment.
