CONSTRUCTION ECONOMICS

Construction Economics

Construction Economics

Task 1

Introduction

Construction industry is considered as the one which indicates when the economy is entering into the recession as it is impacted first when economy undergoes recessionary period. The gross domestic product of the United Kingdom declined by 4.9% in the year 2009 making it the worst year since the Second World War (WWII). Consumer spending has been seen as reduced by as high as 4% since the start of recessionary period. Recession was at its peak in the year 2009 with significant impact on labour market as a result of which employment rate fell to 72.4%, which has been recorded as the lowest since the recession in the year 1996-1997. The greatest number of insolvencies although as reported by the Insolvency Board R3 was in the Real Estate industry, with the renting and business activities being impacted, the second most impacted industry was that of the construction. Construction industry depicted 7,184 insolvencies and the real estate industry being on the top can be explained by the direct relation it holds with the construction industry. It has been suggested by the researches that UK recession would hit the property and construction business badly.

Discussion

UK is currently under the twist of double-dip recession and the heavy rains that UK experienced in the months of March to May further gravitated the situation of which the building and construction experts already had warned. The growth in the sector was negatively impacted. In this time of recession, factors such as heavy rains further impacts the operation of the construction industry, and in addition to this the uncertainty regarding Greece leaving the Eurozone adds further to already gloomy economic outlook for construction firms.

Strategist at Commerzbank further indicates that although the low experienced by the construction industry at the end of the year 2011 was recovered in the early months of 2012 but the impetus is now fading with 2012 depicting extended gloomy periods in the UK economy. Housing industry registers deep impact on the construction sector and bankers and lenders being apprehensive against the mortgaging of houses add more to the economic outlook for the construction sector.

All these economic indicators present above points to invariably to an extraordinary economic pattern for the construction industry where is becomes imperative to investigate the cue that triggers greater economic impact on the construction industry than any other sector. Researches indicate that economic performance of the UK construction firms is affected by disparate factors, most important of which are the role of the government, exchange rate and the inflation.

It is one of the most volatile sector in the economy of any country, be it UK or any other country in Asia. Investments that are made in the construction sector are significant for they are directly correlated with the economic growth and future prospects of any country. When investments are made in the construction sector, they are used in the building of the infrastructure and thus development of the country which in turn triggers ...