Showing posts with label satellite accounts. Show all posts
Showing posts with label satellite accounts. Show all posts

Tuesday 1 December 2020

Production of the Built Environment as an Industrial Sector

 Industries, clusters and sectors


Parts of the economy that involve many different contributors and participants are often called an industrial or economic sector, an example is the non-profit sector with its wide variety of organisations. Although the idea of an industrial sector has no precise meaning, it is often used to describe a loose collection of firms with one or more common characteristics, like ‘manufacturing’ or ‘the business sector’, though firms in these sectors come from many different industries.

 

The starting point is the concept of an industry, which is defined in the Standard Industrial Classification (SIC) used by national statistical agencies as a group of firms with common characteristics in products, services, production processes and logistics. These firms are classified into a four-level structure. The highest level is alphabetically coded divisions such as Agriculture, forestry and fishing (A), Manufacturing (C) and Information and communication (J). The classification is then organised into two-digit subdivisions, three-digit groups, and four-digit classes.

 

The boundaries around an industry are tightly defined by the SIC, to allow identification of individual industries as producers of goods and services and measurement of their contribution to output and employment in the economy. However, to produce something supplies are needed, purchased from other producers, and these relationships between industries are also important. For example, bricks are manufactured products supplied to property developers to provide buildings for their customers. Many industries are structured around such supply chains and production networks, and when enough firms share sufficient characteristics they are often described as an industry cluster. 

 

An industry cluster brings together a group related firms and was originally applied in the 1990s to specific locations like the wine industry in California’s Napa Valley or Bordeaux in France. Over time, the concept itself broadened as different types of clusters were identified, such as creative industry hubs or knowledge centres. Two types of industry cluster are:

 

1.     Geographical – industries using the same resources in a specific location

·       Movies – Hollywood US, Bollywood India;

·       IT – Silicon Valley CA, Silicon Alley NY, Silicon Glen Scotland, Bangalore India;

·       Leather goods, spectacles and glasses – Italy;

·       Health – Boston US, Oxford England, Chennai India;

·       Electronics – Guadalajara Mexico, Cordoba Argentina, Guangdong China;

·       Finance – London England, New York US, Geneva Switzerland; and 

 

2.     Vertical – a hub and spoke value chain from suppliers to end products

·       Automotive – Detroit US, Dusseldorf Germany, Turin Italy, Curitiba Brazil;

·       Aerospace – Toulouse France (Airbus), Seattle US (Boeing);

·       Smart phones – Guangdong China (Apple), Hanoi Vietnam (Samsung).

 

Some industries do not have central locations like the clusters in IT, wine, finance etc., or major hubs where production is concentrated like automobiles and aerospace. These industries are built around decentralised production, distribution and delivery networks that make their products widely available to clients and customers. Four examples are:

·       Pharmaceuticals – a globally distributed industry, with countries combining some form of domestic production and imported supplies;

·       Shipbuilding – brings many suppliers together in a few locations;

·       Electricity generation – brings many suppliers together in many locations;

·       Building and construction – the world’s most ubiquitous industry, sharing the most widely used materials of wood, clay, glass, steel and concrete. Is this really a cluster?

 

Building and construction, in fact, is only one of the many industries involved in the production of the built environment. There is a diverse collection of industries that create, manage and maintain the built environment. On-site work links suppliers of materials, machinery and equipment, products and components, and all other inputs required to deliver the buildings and structures that make up the built environment. Consultants provide design, engineering, cost planning and project management services. Once produced, buildings and structures then need to be managed and maintained over their life-cycle, work done by another group of related industries. The built environment also needs infrastructure and services like water and waste disposal, provided by yet more industries. 

 

A dense network of many different firms and participants such as this is often called an industrial or economic sector, because it is too diverse and distributed to be a cluster. There is no definition of an industrial sector, beyond a broad collection of firms with one or more common characteristics, like ‘manufacturing’ or ‘the business sector’, though firms in these sectors come from many different industries. There are also sectors based around a definable market, two examples being:

·       Defence - there is no defence ‘industry’ because suppliers come from many different industries like IT, aerospace and shipbuilding, but as a sector share resources and clients; and 

·       Tourism - which brings together the contributions of industries like accommodation, tour operators and entertainment. Australia has an annual Tourism Satellite Account produced each year (cofounded by industry and government). 

 

If the built environment encompasses the entirety of the human built world, then the built environment sector (BES) is the collection of industries responsible for producing, managing and maintaining the buildings and structures that humans build. To be included in the BES an Industry needs a direct physical relationship with buildings and structures. Those industries can be divided into those on the demand side and those on the supply side, like materials or specialised tradesmen, Demand side industries like property developers and facility managers pull output from the supply side, both for new output and for servicing and managing existing assets. Therefore the BES is a sector more like defence than tourism, because it also produces long-lived assets for clients outside the sector (governments and owners respectively) that require repair and maintenance, and that R&M generates significant ongoing revenue for firms across the broad industry sector that produces those assets. 

The concept of the BES is broad and extensive, so cannot be precise and exact. While the boundaries of industries and markets are important, in practice the data and SIC definitions are the starting point for the data used. The industries included are selected because they clearly have a relationship with construction, management and maintenance of the built environment. This may not capture every last contribution to the BES, but it does allow the development of a profile of the sector. Measuring the BES provides data on its relationship to the wider economy and is relevant to a wide range of policies and issues currently facing the built environment. 

Monday 17 July 2017

The Australian Built Environment Sector

The Economic Contribution of the BES



The Australian Bureau of Statistics publication Australian Industry (ABS 8155) uses a wide sample of private sector firms and non-profit organizations to get financial data on balance sheet items. This is the modern approach to national statistics, accessing and organizing data from a range of sources, mostly digital. As explained by the ABS:

This publication presents estimates of the economic and financial performance of Australian industry in 2015-16. The estimates are produced annually using a combination of directly collected data from the annual Economic Activity Survey, conducted by the Australian Bureau of Statistics, and Business Activity Statement data provided by businesses to the Australian Taxation Office.

Australian Industry provides a useful data set to compare industries with, and to compare sectors (called divisions and subdivisions) within industries. The data excludes the public sector but includes non-profits in industries like health and education, which are combined with private sector businesses to get a total for the non-government part of the economy.

Figure 1 shows the Total All Selected Industries and the Construction industry’s share for three of the data series produced: employment; wages and salaries; and industry value added, a measure of output. In 2015-16 Construction employed 1.04 million people, 9.7 per cent of the total, paid 11.3 per cent of total wages and salaries, and contributed 10 8 per cent to the output of the non-government sector.

Figure 1. Construction Share of Industry Output and Employment


The building and construction work done and output statistics capture the on-site activities of contractors and subcontractors. The construction industry, however, has an important role linking suppliers of materials, machinery, products, services and other inputs to the public and private clients on the demand side. These two views have been called broad and narrow, with the narrow industry defined as on-site work and the broad industry as the supply chain of materials, products and assemblies, and professional services. Production of the built environment, how it is created and maintained through project initiation, design, fabrication and construction to operation, repair and maintenance, requires a deep and dense network of firms. With the property and real estate industries on the demand side, these firms make up the built environment sector.

Employment and value added data from Australian Industry 2015-16 is provided at three levels, for industries, divisions and subdivisions. Construction data is at the two digit division level, but data on Manufacturing and Professional and technical services is given at the three digit sub-division level. This allows the contribution to the built environment sector of relevant parts of those industries to be identified. After combining the on-site work done by contractors and sub-contractors with manufacturing, property and real estate services, professional services and quarrying, the built environment sector accounts for 16.4 per cent of total employment and 21 per cent of output, measured as industry value added, of the Australian non-government sector.

The idea that the construction industry, as measured in the national accounts, is only one part of the creation and maintenance of the built environment recognizes the industry’s extensive linkages with other sectors. Through those linkages the impact of construction activities on other parts of the economy is much greater than their direct contribution.

The on-site work done by contractors and subcontractors is only around half the total economic contribution of the built environment sector when downstream suppliers and the property and real estate industries on the demand side are added. 

Table 1. Australian Built Environment Sector
2015-16
Employment
Value Added
Employment
Value Added
Industry
Number
$mn
Number
$mn
30 Building construction
206,000
27,319


31 Heavy and civil engineering construction
121,000
21,156


32 Construction services
713,000
68,222


Total construction
1,040,000
116,697
1,040,000
116,697





6921 Architectural services
40,153
3,942


6922 Surveying and mapping services
15,853
1,872


6923 Engineering design and engineering consulting
132,498
17,889


6924 Other specialised design services
30,479
2,384


Total professional, scientific and technical services
218,983
26,087
218,983
26,087





1331 Textile floor covering manufacturing
1,470
205


1491 Prefabricated wooden building manufacturing
753
77


1492 Wooden structural fittings and components
23,752
2,160


1493 Veneer and plywood manufacturing
825
88


1916 Paint and coatings manufacturing
6,853
1,103


2010 Glass and glass product manufacturing
9,085
1,358


2021 Clay brick manufacturing
1,999
433


2029 Other ceramic product manufacturing
1,944
175


2031 Cement and lime manufacturing
3,229
1,191


2032 Plaster product manufacturing
1,548
290


2033 Ready-mixed concrete manufacturing
8,359
1,311


2034 Concrete product manufacturing
7,388
793


2221 Structural steel fabricating
18,676
1,761


2222 Prefabricated metal building manufacturing
5,384
626


2223 Architectural aluminium product manufacturing
15,938
1,486


2224 Metal roof and guttering manufacturing
3,631
362


2229 Other structural metal product manufacturing
8,580
814


2452 Space heating, cooling and ventilation equipment
5,135
645


2462 Mining and construction machinery manufacturing
8,195
1,008


Total manufacturing
132,744
15,886
132,744
15,886





67 Property operators and real estate services
345,000
66,382
345,000
66,382
09 Non-metallic mineral mining and quarrying
12,000
2,476
12,000
2,476





Total Australian built environment sector


1,748,727
227,528
Per cent of all industries


16.4
21.0
Total all industries


10,678,000
1,083,865
Source: Australian Industry ABS 8155.