The Role of Construction in Economic Growth and Recovery

The construction industry in the UK was worth around £370 billion in 2016. And as of 2020, it contributed around 7% to the country’s GDP. Simply put, the economic impact of the construction industry is hard to overestimate.

While it does contribute to massive economic growth, the industry has still faced a fair share of challenges. Everything from a pandemic to a new European war has caused negative economic trends. So, government leaders are stepping in to protect it, and change the country’s economic trends.

Keep reading below to learn about how much the construction industry impacts the UK’s economy!

The Construction Industry Builds Up an Economy

Building up a country’s economy is not an easy task. To successfully create opportunities for people and to help people build wealth, leaders need to build. They need new schools, homes, businesses, and more before people can start building better lives.

Before they can create those buildings though, leaders and workers need to work together. Usually, municipalities and councils meet to discuss projects they think would improve a community. Then, they invite contractors and companies to bid on taking on the project.

The companies have the skills needed to create buildings and the connections to source the materials. Normally, city leaders may not have that expertise on their own. However, they may show favour towards companies located nearby.

If they work with contractors located in the same city, then the workers would have an interest in the project. The money would also stay in the community, being reinvested to improve the lives of everyone.

The Economic Impact of New Buildings Can Change Communities

New buildings are just a way to make city skylines prettier — they also create foundations for industries. First, a well-designed office building can attract new startups eager to make a mark on the world. They may have ideas for new kinds of software, or they may plan to experiment with new ideas.

Those kinds of startups can create new kinds of industries in their cities. On the other hand, existing industries can get a boost in profit from construction projects. An improved skyline can help boost a city’s tourism statistics, helping out its tourism industry.

And when large companies like Google see that an area has a lot of development in the works, they pay attention. They may decide that an area is growing enough for them to invest in it, and start buying office buildings too. When large companies move into an area, they usually bring millions of dollars to spend on local amenities.

Economic Trends Point Towards Slow Recovery

Although the construction industry is the bedrock of most local economies, recovery from the COVID-19 pandemic could be slow. Most leaders are pouring money into funds to support the construction industry. But simply giving companies more money may not be enough.

The COVID-19 pandemic strained the construction industry by removing labourers from the equation. The work became too risky, with people routinely exposing themselves to the coronavirus. On top of that, there was suddenly less demand for office buildings as companies pivoted to remote work.

Now, things are slowly getting back to normal. However, the wounds of the pandemic are lingering with new supply chain challenges and changing markets. On top of that, international turmoil is upsetting some of the ways construction companies source their materials.

The Construction Industry Depends on Raw Materials

When COVID-19 started spreading, fewer raw materials were being shipped. There were fewer workers to extract and refine those materials, so fewer materials were available. Fewer people were also working at ports and on ships, complicating supply chains.

As a result, the price of things like wood and aluminium skyrocketed. The only way companies could survive is by charging higher prices for jobs, which many people did not want to pay at first. Now though, there is a consensus among leaders and communities.

Economies can only recover if everyone participates in it. So, city leaders are commissioning construction companies to work on projects and are finding new ways to pay for them. Demand in the construction industry is increasing as a result.

That is leading to gradual increases in demand for raw materials. And when companies across the world see a need for more raw materials, they will likely pay more for workers to extract and ship them. That can result in supply chains gradually recovering, helping return the global economy back to normal.

International Politics Brings New Challenges

War is never good, but it can create new demand for construction companies. The war in Ukraine is destructive and devastating, and cities are crumbling. When all is said and done, there will be a need for companies to step in and rebuild.

Construction leaders are preparing for that time right now, stockpiling materials and finding new workers. But in the meantime, the war is complicating current projects. War may create new demands, but it also strains existing demands.

As a result of the war, prices are staying high for raw materials. They can’t be flown or shipped through usual ports, causing supply lines to change. Construction companies need to pay for it, and they may need to pass that price on to customers too.

Companies Need Support to Succeed

Government leaders have seen the devastating impact of the pandemic and the war in Ukraine. They are trying to help construction companies survive. They know that if construction companies start going under, the rest of the economy will inevitably follow.

So, many are budgeting subsidies for companies. They are also finding new work for these companies, creating space for economies to grow. They are also urging developers to build homes for people, as the housing market across the world reels from the economic turmoil.

The more companies build homes, the more space there will be for people to live their lives. They will be able to put down roots, helping stabilize local economies and keep money flowing inside of communities.

Construction and Economic Growth Go Hand-In-Hand

The economic impact that the construction industry has is hard to overestimate. These kinds of companies literally form the foundation for other businesses. They provide the homes and the tools people need to live their lives.

Economic trends show that there is more demand for these kinds of companies than ever. Leaders are trying to find more work for them, so the companies can survive challenging economic trends. As a result, companies can find projects and subsidies in almost any part of the country.

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The Role of Construction in Economic Growth and Recovery