Long-run Employment in Australian Construction 1986 - 2025

Industry and occupation data for construction and related industries

There is a widely held view that one of the biggest problems in Australian construction is a lack of workers. The previous post was on Infrastructure Australia’s 2025 report on industry capacity and their estimate of a current shortage of 202,000 infrastructure workers and a peak shortage of 420,000 workers in 2027. The Housing Industry Association claims an 83,000 ‘tradies shortfall’, and the Master Builders Association’s 2024 Future of the Workforce report said the industry needed to replace 110,000 retirements a year with another 130,000 workers required to meet demand. 

How accurate and realistic are these claims? Without doubt there are local shortages of workers, especially in regional areas where supply is limited by the size and age of the local population, because the regions are typically older and this is where many of the transmission lines and energy generation projects are located. Also, when too many major projects are commenced at the same time there will be labour shortages and cost increases, like the three Queensland LNG plants in 2014, transport projects in Sydney and Melbourne over the last few years, and probably for the 2032 Olympic Games in Brisbane. However, overwhelming the supply chain by simultaneously running too many major projects is evidence of poor understanding and management of the major project pipeline, not of worker shortages.

Industry capacity for construction is not like manufacturing or other industries with fixed plant and equipment and factories. In a factory or power plant the quantity and availability of that fixed capital puts an identifiable physical limit on output. In construction there will be an upper limit on capacity, but that is not fixed in the same way because output can always be increased by adding more workers, which is what happened in the apartment boom between 2015 and 2018. 

The other way construction adjusts to increasing demand is increasing project delivery times. Capacity is limited by availability, and resources get spread over more work as new projects are started. Materials supply is fixed in the short-run, and the available labour supply will  get exhausted. The result is fewer people on a site and slower progress of ongoing work. At high levels of demand, lead times and cycle times increase and there are more bottlenecks in the supply chain.

In 2025 there are 1.35 million people employed in Construction, and another 330,000 in Architecture, engineering and surveying. In fact, there are more people employed in construction now than at any time in the past, with Construction employment at record highs. This is also the case for many of the trades and professional services. How can the reports and forecasts of shortages be reconciled with the data? 

This post looks at the long-run data on employment in construction and related industries and occupations, which is available from 1986 to 2025 from Jobs and Skills Australia. The data shows trends over time, not current conditions. However, changes in employment patterns happen slowly, and trends clearly show those changes, and are powerful indicators of the number of people that may be employed in the near future.

Jobs and Skills Australia Data

In the following figures the number of people employed is based on Jobs and Skills Australia (JSA) Industry Trends and Occupation Trends, that use data from the Australian Bureau of Statistics (ABS) Labour Force Survey smoothed by JSA to identify long-term trends. While the ABS does seasonal adjustment and trending at aggregate levels, the ABS detailed industry and occupation data are released as original data series only. JSA provides disaggregated data for those detailed labour force estimates, in ‘a heavily smoothed long-term trend’ that will not reflect short-term changes in current conditions. The JSA Trending Methodology is explained here.

Industry Data

The ABS industry classification system has four levels: Division, Subdivision, Group and Class. Construction is Division E, and Table 1 has the breakdown of the industry into its three Subdivisions, eight Groups and twenty-four Classes. JSA’s Industry Trends uses this classification system and employment data is available from 1986.

Table 1. Division E Construction

Source: ABS Australian and New Zealand Standard Industrial Classification 

Occupation Data

JSA employment by occupation data is available as Occupation Trends from 1986. An ‘occupation’ is defined as a group of similar tasks or jobs based on five skill levels and skill specialisations like knowledge, tools and materials. The classification system  has five levels: eight major groups, 53 sub-major groups, 111 minor groups, 421 unit groups, and 1,156 occupations [1]. There are also workers in a ‘not further defined’ (nfd)  category, who cannot be classified to an occupation but are included in a group. There is a loose alignment with the industry classification system at the sub-group level, but it is not exact. Using Bricklayers as an example of the classification structure:

• Major Group – Technicians and Trades Workers

• Sub-major Group – Building Structural Trades Workers

• Minor Group – Bricklayers, Stonemasons and Concreters

• Unit Group – Bricklayers and Stonemasons

• Occupation - Bricklayers

Construction Employment 

Figure 1 shows the effect of JSA’s smoothing of the quarterly rises and falls in Construction employment into a long-term trend line. The figure shows the increase in the total number employed in since 1986, with the value of work done adjusted for inflation (the ABS chain volume measure of output) for comparison. The relationship is clear, except for the mining boom that started in 2007 and ran to 2104. Because expenditure on imported plant and equipment like oil platforms, mining machinery and gas liquefaction systems was included in the value of construction work done during the mining boom, this artificially boosted its value before falling once the boom was over. 

Figure 1. Employment and work done

Note: Work done is chain volume measure, seasonally adjusted trend. 

Sources: ABS 8755 and JSA Industry Trends.

Apart from the mining boom there are three points of interest. The first is the sustained rise in both work done and employment from the mid-1990s to the mid-2000s, as employment closely tracked the increasing value of work done. The second is the sharp increase in employment in 2015 at the start of the residential building and apartment boom that followed the mining boom. The third is the three years after 2021 as employment increased faster than work done, which increased with excessive Homebuilder subsidies and grants [2]. 

In August 2021 there were 1.148 million people employed in Construction, in August 2022 that had risen to 1.242 million, in August 2023 to 1.321 million, and in August 2024 1.342 million were employed. This was an increase of almost 200,000 in three years, of which 120,000 were in Construction services as a result of the apprentice incentive schemes introduced during the Pandemic. 

Construction Contractors 

Figure 2 has employment by the three contractor groups. The 512,700 total includes trades directly employed by these firms as well as other professionals, managers and office workers. There are also workers in a ‘not further defined’ (nfd)  category, who cannot be classified to an occupation but are included in the Building subdivision. The rapid increase in their numbers over the last few years suggests many of these workers are in new occupations not yet in the classification system, examples could be BIM managers, heat pump and solar panel installers. The increase in Building nfd started with the Covid incentive schemes. 

Figure 2. Employment by contractor groups

 Source: JSA Industry Trends

In Engineering there has been a significant structural shift in the ratio of professionals to technicians. In 1986 there were two Civil engineering professionals to each Civil engineering draftsperson and technician, by 2025 there were five professionals for each draftsperson and technician. 

Figure 3. Civil Engineering

Source: JSA Occupation Trends

Figure 4 has the number employed for Construction managers and Trades workers. Between 1986 and 2025 the number of managers increased from 43,300 to 131,400 and Trades workers from 244,400 to 414,000. What is significant is the change in the ratio of managers to workers, which was just over 6 in the late 1990s and early 2000s but then fell to 3.2 in the 2020s. Between 2006 and 2025 the number of managers doubled, from 61,200 to 131,400, while trades workers went from 344,500 to 414,000, so over those two decades the increase in both was almost the same at 70,200 for managers and 69,500 for trades workers. For every extra trades worker there was another manager. This is telling us something important about the industry, and is probably one of the reasons there has been no increase in measured productivity. 

Figure 4. Construction managers and Trades workers

 Source: JSA Occupation Trends

JSA defines Construction Managers as workers who ‘plan, organise, direct, control and coordinate the construction of civil engineering projects, buildings and dwellings, and the physical and human resources involved in building and construction.’ Their tasks are: interpret drawings  and specifications, coordinate labour and implement work programs, coordinate procurement and delivery of materials, plant and equipment, prepare tenders and bids, ensure adherence to building legislation and standards, arrange inspections, and negotiate with stakeholders. Construction Managers are broken down into two specific roles. In 2025 there were 60,200 Construction project managers and 47,800 Project builders. Construction Project Managers manage civil engineering and building projects, while Project Builders manage the construction, alteration and renovation of dwellings and other buildings. 

Construction Trades

Figure 5 has the five Construction services industry groups. Building installation services have had the largest increase in numbers, from 105,000 in 1986 to 320,000 workers in 2025, and is now by far the largest group. The other group with a significant increase is Building completion services, which increased from 76,000 to 210,000 and is the second largest group. These groups both rose by around three times. They include electrical, HVAC, plumbing, carpentry and painting, and the increase in their numbers reflects increasing complexity and the rising share of building services in the total cost.

Other building services had the biggest increase of over four times, going from 31,000 in 1986 to 134,000 in 2025, with most of that increase due to Machinery operators. Building structure employment increased from to 106,000, and Land development and site preparation had the smallest increase of only 26,000 workers, going from 31,000 to 57,000. 

Figure 5. Employment in Construction services groups

Source: JSA Industry Trends

Figures 6, 7 and 8 have employment by occupation for construction trades, grouped by size. Electricians are by far the largest. Figure 6 has the three largest occupations and shows a significant increase in the number of electricians and plumbers, both of whose numbers have more than doubled since the mid-1990s. In Figure 7, over the last couple of decades the number of Bricklayers has fallen and the number of Plasterers barely changed, however there are more Painting trades people. 

Figure 6. Carpenters, electricians and plumbers

 Source: JSA Occupation Trends

Figure 7. Bricklayers, painters and plasterers

Source: JSA Occupation Trends

Figure 8 has the four smallest trades of Floor finishers, Glaziers and Tilers. The number of Wall and floor tilers has more than doubled to over 22,000, but Floor finishers, Glaziers and Roof tilers each have around 10,000 workers, have had no increase over the last two decades, and are the trades occupations with the lowest numbers. 

Figure 8. Floor finishers, glaziers and tilers

Source: JSA Occupation Trends

There have been small increases in the number of Crane, hoist and lift operators and Earthmoving plant operators. The former went from 12,200 in 1986 to 16,900 in 2025, while Earthmoving plant operator numbers increased from 38,600 to 49,100. This interesting because there has been little increase in the number of machinery operators but a large increase in the volume of work done. The Q3 2025 the RLB Crane Index had 845 cranes in use in Australia, above the long-term average of 775. 

Figure 9. Crane and earthmoving operators

Source: JSA Occupation Trends
 

Finally, Figure 10 has Construction labourers. There was a total of 192,100 in 2025, almost all in construction. The two largest occupations are Building and plumbing labourers with 71,500 and Concreters with 37,200 employed in 2025. For the other occupations, Structural steel and Insulation had around 25,000, and Fencers 13,000. 

Figure 10. Construction labourers 

Source: JSA Occupation Trends

Professional and Technical Services

Figure 11 has Construction work done and employment in the Architectural, engineering and technical services industry group that is part of the Scientific, technical and professional services industry. Employment increased from in 1986 to in 2025. The JSA smoothed trend shows a remarkably consistent increase. The overall pattern is similar to Construction work, with a turning point in the mid-1980s when the growth rate sharply increased, a flattening out of growth in the mid-2010s, and higher recent growth. 

Figure 11. Professional services and work don 

Note: Work done is chain volume measure.

Sources: ABS 8755 and JSA Industry Trends

Figure 12 has the number of architects and surveyors. They total 51,000 in 2025, of which 29,600 were Architects and landscape architects, however on the JSA website in 2025 there were 3,800 Landscape architects and 19,300 Architects. Thus there are around 6,000 other employed people in this category who are neither, which may be where people working on digital twins and BIM end up because Architects prepare ‘project documentation, including sketches and scale drawings, and integrate structural, mechanical and aesthetic elements in final designs.’

Figure 12. Architects and surveyors

Source: JSA Occupational Trends

Figure 13 has two other occupations. In 2025 there were 173,700 Contract, program and project administrators, and their numbers have steadily increased from only 14,000 in 1988, and in 1986 there were 30,500 Architectural, building and surveying technicians with 83,800 employed in 2025.  These employees would be spread across a number of industry groups based on the classification of their employer as a construction contractor or subcontractors, architecture or surveying practice, or project manager (classified as a business service).

Figure 13. Technicians and administrators

Source: JSA Occupation Trends

Construction Manufacturing Industries

Along with trade and contractor employment there are many people employed in manufacturing industries that supply construction. Onsite construction brings together a wide range of materials and components, for example a detached house would typically have around five thousand different items and a ten story office building could have up to fifty thousand items. The following figures have the industry employment data for seven manufacturing industries that produce construction inputs.

Figure 14. Timber and wood products

 

Source: JSA Industry Trends

The general pattern in manufacturing has been a long-term decline in employment, but there is wide variation. In Figure 14, Sawmilling and timber dressing employment has fallen from 17,000 in 1986 to almost halve by 2025 at 9,000, while Other wood products has  only declined by 4,000 workers, from 31,000 to 27,000 in 2025. In Figure 15, Structural steel has not changed but Other fabricated metal fell from 51,000 in 1996  to 21,000 in 2014, while Heating, compressors and ventilation equipment employment has no changed. 

Figure 15. Metal and HVAC  

Source: JSA Industry Trends

In Figure 16, employment in glass products has been quite stable, also in Ceramic products after 2006. The big decline has been in Cement and concrete, falling from 26,000 in 1986 to 11,000 in 2025. That is not because less cement and concrete is being produced. Although the ABS no longer publishes production volumes, the industry output and value added for the Cement, lime, plaster and concrete manufacturing industry class has continued to increase as employment fell.

Figure 16. Concrete, glass and ceramics

Source: JSA Industry Trends

Conclusion

The Jobs and Skills Australia (JSA) employment data this post uses goes back to 1986. It is available as Industry Trends, at the five ANZSIC levels, and as Occupation Trends, for over 1,000 different occupations. The JSA trending methodology is particularly good at clarifying long-term trends as it smooths the ups and downs in the quarterly data from the ABS Labour Force survey, and by disaggregating and trending the ABS data for industry classes and occupations it provides detailed data on the workforce not available elsewhere.

What does the data say? First, the long-run trend for total Construction employment shows it increasing, and the trend in employment has tracked changes in the volume of work don, with the exception being the unusual circumstances of the mining boom. This is particularly noticeable with the sharp increases in employment in the late 2010s during the apartment boom and then after 2021 with the introduction of HomeBuilder subsidies and apprentice incentive schemes. This suggests that in the right circumstances employment numbers in Construction can be increased quickly. In particular, the combination of a rapid rise in work and the highly effective apprentice incentive schemes introduced in 2021 led to a rapid increase in the number of trades people employed. 

Second, there have been a few occupations with very large increases, notably Contract, program and project administrators at 173,000 have twelve times as many people employed in 2025 compared to 1986. Many of those workers will be employed by contractors, and have contributed to the rise in employment seen in the Residential building and Engineering industry groups. In Construction services Installation and Building completion services had much larger increases than the other industry groups, and the occupations Electricians, Plumbers and Wall and floor tilers have doubled employment since 2006. 

Third, many of the trade occupations have had little or no growth in numbers since 2006. Bricklayers, concreters, roof tilers, floor finishers, plasterers and glaziers are all in this category. There has been no growth in the Land development and site preparation industry group, reflected in the stable number of earthmoving operators over the last few decades. However, the number of Crane, hoist and lift operators has increased by half since 2006 to 17,000.

Fourth is the role of technicians. In 2025 there were 51,000 Architects and Surveyors, but 83,000 Architecture, building and surveying technicians, increasing from 31,000 in 1986. Engineering went the other way. From two Civil engineering professionals to each Civil engineering draftsperson and technician in 1986, by 2025 there were five professionals for each draftsperson and technician. 

Fifth is the change in the ratio of Construction managers to trades workers, which was just over 6 in the late 1990s and early 2000s but fell to 3.2 in the 2020s. Between 2006 and 2025 for every extra trades worker there was another manager, as the number of managers went from 61,200 to 131,400 and trades workers went from 344,500 to 414,000, with the increase in both almost the same at 70,200 for managers and 69,500 for trades workers. Along with the increased number of Contract, program and project administrators, this must be part of the explanation of the low rate of productivity growth in the industry. 

If changes in employment trends vary greatly across the industry groups and occupations what do the forecasts of worker shortages mean? Do shortages mean projects are not started because workers are not available, or lead times increase, or projects take longer to deliver because the workforce is spread over many projects? Are there more delays and bottlenecks due to such shortages? The example of residential building during the HomeBuilder Program is clear. The program quickly increased housing commencements to record levels but completion times also increased, and it took three years to complete the extra 100,000 houses commenced in 2020 and 2021. Completion times for houses doubled during the pandemic.

Figure 17. Residential building

 

Obviously, there will be shortages at certain times in certain places, but those specific instances should not be generalised to the industry. Equally, sudden shifts in demand, like large infrastructure projects or the current energy transition, can also see short-term shortages. Without suggesting there are no and will never be any shortages, claims about current and future shortages have to be seen as just that, they are claims not facts. 

Another problem is the short-term nature of forecasts of shortages. They are typically only a few years into the future, and the long-term data clearly shows employment in the industry adjusts to both the level of demand and the demand for specific skills. The industry groups of Residential building and Engineering have seen solid increases in employment over the last couple of decades, and that is where the demand has been, and the increase in the number of electricians and project administrators reflects changes in the demand for skills. 

Construction is a project-based industry, and capacity is largely determined by the availability of labour, skills and expertise. Output is affected by factors like weather, regulations, materials supply, and project timelines. The industry requires specialised skills and uses subcontracting, so the industry is fragmented and has many small firms, but adding firms also increases capacity. All those characteristics make it difficult to define the maximum output for the industry, so claims and forecasts of worker and skill shortages are at best estimates that reflect assumptions about the ability of the industry to adapt and grow. The long-run data shows Construction employment tracks the level of work done, the exception being the mining boom, and has seen the number of people employed increase when demand and the volume of work increase. Capacity is a concept that has to be used carefully for the construction industry, balancing an estimate of maximum output with the effect on project performance of high levels of activity.

Entry, Exit and Insolvencies in Australian Construction

 The number of businesses is at a record high

 

 

There has been a lot of attention on the increase in insolvencies of Australian construction businesses. In 2023-2024 the number of insolvencies was 3,882, which was the highest number across all industries, and the construction share of total insolvencies was 26 percent. However, the reporting of these numbers usually does not include any context, and therefore lacks perspective, and focusing on the number of insolvencies can be misleading if industry characteristics are not also considered. 

 

This post compares the insolvencies data from the Australian Securities and Investment Commission (ASIC) with the data available from the Australian Bureau of Statistics publication Counts of Australian Businesses. The ABS data gives the number of businesses that enter and exit each quarter, and the number of businesses operating at the end of each quarter, and is published quarterly with data that goes back to June 2020 in its current format.

 

The ABS data is based on Australian Business Number (ABN) registrations and sourced from Australian Tax Office records of businesses that file a business activity statement and pay Goods and Services Tax (GST). An entry is an ABN that starts paying GST or restarts after a break of more than five quarters. An exit is an ABN that is no longer actively trading because the business has cancelled their ABN, ceased remitting GST, or the ABN has changed due to a merger or acquisition. Therefore exits occur when a business has closed, has been sold, has significantly changed structure, or is no longer operating in Australia. Importantly, insolvencies are only a small proportion of the number of exits. 

 

 

Insolvencies

 

Data on insolvencies comes from the Australian Securities and Investment Commission (ASIC). There are three data sets: insolvencies where an external administrator is appointed for the first time; for any later appointment of an administrator to that business; and for voluntary liquidations where a solvent business reports it is no longer operating. Figure 1 shows this data for three years to 2024. In those years there were only 185, 213 and 170 voluntary liquidations of insolvent construction firms that ceased operating.

 

Construction insolvencies where an administrator or controller was appointed for the first time went from 1,284 in 2021-2022, to 2,213 in 2022-2023, then up to 2,977 in 2023-2024. This was a significant increase, and is the number that is typically used in media reports on construction insolvencies (e.g. Australian Financial Review, Macrobusiness). 

 

A better number includes businesses failing for a second time, or more, after a restructuring and agreement with creditors that allowed a business to continue. There were 355, 599 and 905 of these in the three years, so there was a big increase in construction businesses going into administration again in 2023-2024. Adding repeat insolvencies to first insolvencies and voluntary liquidations gives the total for all insolvencies.

 

Figure 1. Australian construction 2022-2024

 

Source: ASIC

 

 

Construction does have the highest number of insolvencies compared to other industries, but the construction share of total insolvencies has not been increasing, and was 25, 27 and 26 percent in those years. This is higher than the construction share of the total number of Australian businesses, which is 17 percent, but construction also has a higher proportion of micro and small businesses than other industries. 

 

Two of the reasons why construction businesses are more likely to become insolvent are this prevalence of micro and small firms and the knock-on effects on subcontractors when a contractor goes under, where many of the unsecured creditors will be subcontractors on their projects. Most subcontractors are micro or small businesses, and many are extremely vulnerable to a contractor’s insolvency. Businesses employing less than 5 people account for 65 percent of all construction businesses, and these businesses have little capital and few resources. Micro and small businesses have a much higher insolvency rate than larger businesses. 

 

Because of measures put in place to support industry during the Covid pandemic there were fewer insolvencies than usual in 2021-22, with a total of 1,639 construction businesses going into administration. The numbers for 2023 and 2024 are more typical, and these show a substantial increase in total insolvencies from 2,812 to 3,882.

 

However, in June 2024 there were 452,626 operating construction businesses, so the insolvency rate was less than one percent. Further, there are many more businesses in Construction than any other industry. The industry with the second highest number is Professional, Scientific and Technical Services with 344,311 businesses, the third is Rental, Hiring and Real Estate Services with 298,764 businesses, and the fourth is Transport, Postal and Warehousing with 237,326 businesses.

 

Construction Industry Entry and Exit

 

How does the number of ASIC insolvencies compare to the ABS Count of Businesses data?

The ABS numbers for annual business exits are much larger than the number of insolvencies, and were 69,972 in 2021-2022, 78,667 in 2022-2023, and 81,354 in 2023-2024. Again, there was a substantial increase between 2022 and 2023 as pandemic measures were unwound, but the increase between 2023 and 2024 was not as great. 

 

Clearly, insolvency is not the main driver of exits from the construction industry, as the cumulative total was only 8,333 insolvencies over the three years. Some unknown proportion of exits will be businesses that have paused operation, and stopped paying GST for a couple of years, probably because of market conditions. 

 

The ABS data is quarterly, and for exits in particular there is a marked seasonal pattern, with a cycle that peaks in the December quarter and has a low in the March or June quarters. As Figure 2 shows, there is a different cycle for entry, which peaks in the September quarter. What is driving these regular cycles of entry and exit is a matter for speculation. Entries can be births (new ABNs) or other (an ABN that has been reclassified or restarted GST payments). For Construction, in most quarters there are more births than others, for example in the June 2024 quarter there were 12,229 births and 10,753 other entries. 

 

There are, over time, more entries than exits, except for the December quarter. The average quarterly number for exits since 2020 was 17,886 and for entries was 21,574. The net result is that the number of construction businesses has been increasing steadily since 2020, rising from 397,920 in June 2020 to 452,626 in June 2024, a 14 percent increase in the number of businesses. If the number of businesses is representative of industry capacity and the supply side of construction, these numbers suggest industry capacity has been increasing.

 

Figure 2. Australian construction 

 

Source: ABS 8165

 

The ABS also has overall entry and exits by employment size, although this is not given for individual industries. In 2023-2024 Non-employing businesses had an exit rate of 17.7 percent, and businesses employing 1 to 4 people an exit rate of 9.5 percent. These rates are much higher than those for larger businesses, those employing 5 to 19 people was 5.5 percent, businesses employing 20 to 199 people 3.1 percent, and those employing over 200 has an exit rate of 3.2 percent. As noted above, exit rates are not the same as insolvencies, but this is good evidence of a higher rate of insolvencies in the micro and small businesses that are the great majority of construction firms. 

 

The ABS calculates industry entry and exit rates as percentages, and Construction does not have the highest rates. As table 1 shows, there are many industries with higher entry and exit rates, although no other industry has a larger number of businesses than Construction. In the 2023 December quarter the exit rate was higher than the 5.8 percent for Construction in five industries, and around the same rate in five others. In the 2023 September quarter the entry rate was higher in six industries, and around the same in seven others. In those quarters for all Australian businesses the exit rate was 5.3 percent and the entry rate was 5.5 percent, so the exit rate for Construction was slightly higher and the entry rate exactly the same. 

 

Table 1. Number of businesses, entry and exit rates in peak months, by industry

 

 

Construction industry sub-divisions

 

The ABS also provides this data for the three industry sub-divisions. The numbers for operating businesses are of particular interest. In June 2024 there were 10,542 Engineering construction businesses, 108,764 Building construction businesses, and 332,320 Construction services businesses. These sub-divisions had 2.3, 24 and 73.7 percent of the total number of construction businesses.

 

The same pattern of a December quarter high for exits and a September quarter high for entries also holds for the sub-divisions, with December 2022 having the largest number of exits for all three sub-divisions. The March 2023 quarter was the low for entries for Building construction and Construction services, and March 2024 the low for entries in Engineering construction. Figures 3, 4 and 5 have this data.

 

Figure 3. Australian Building construction 

 

Source: ABS 8165

 

 

Figure 4. Engineering construction

 

Source: ABS 8165

 

 

Figure 5. Construction services

 

Source: ABS 8165

 

For all three sub-divisions the total number of businesses has been increasing. Between June 2020 and June 2024 the number of Engineering construction businesses went from 10,052 to 10,542, Building construction businesses from 90,722 to 108,764, and Construction services businesses from 296,246 to 332,320. As percentage increases over four years these were 5, 20, and 13 percent respectively. The average quarterly number of exits and entry between 2020 and 2024 for Engineering were 363 and 395 businesses, for Building were 4,666 and 5,837 businesses, and for Construction services were 12,858 and 15,543 businesses. 

Conclusion

 

ASIC data shows a total of 3,882 construction businesses becoming insolvent in 2023-2024, and the industry had the highest number of failures with 26 percent of all insolvencies. However, this needs to be kept in context, because Construction by far the largest number of businesses compared to other industries, and in 2024 had 17 percent of all businesses, and with over 450,000 businesses has a failure rate of less than one percent. It is misleading to claim Construction has an exceptionally high number of insolvencies. 

 

The ABS numbers for annual business exits are much larger than the number of insolvencies, and were 69,972 in 2021-22, 78,667 in 2022-23, and 81,354 in 2023-24. There was a substantial increase between 2022 and 2023 as pandemic measures were unwound, but the increase between 2023 and 2024 was not as great. Clearly, the insolvency of a few thousand businesses is not the main driver of exits from the construction industry.

 

The ABS data for exits has a marked seasonal pattern, with a cycle that peaks in the December quarter and a low in the March or June quarters. There is a different cycle for entry, which peaks in the September quarter. What is driving these regular cycles of entry and exit in Construction is a matter for speculation. 

 

Many industries have higher entry and exit rates than Construction, although no other industry has a larger number of businesses. In the 2023 December quarter the exit rate in five industries was higher than in Construction and around the same rate in five others. In the 2023 September quarter the entry rate was higher in six industries, and around the same in seven others. 

 

There are more entries than exits, except for the December quarter. The average quarterly number for exits since 2020 was 17,886 and for entries was 21,574, so the number of construction businesses has been increasing steadily since 2020, rising from 397,920 in June 2020 to 452,626 in June 2024, a 14 percent increase in the number of businesses. If the number of businesses is representative of industry capacity and the supply side of Construction, these numbers suggest industry capacity has been increasing.

 

For all three sub-divisions the total number of businesses has been increasing. Between June 2020 and June 2024 the number of Engineering Construction businesses went from 10,052 to 10,542, Building Construction businesses from 90,722 to 108,764, and Construction Services businesses from 296,246 to 332,320. These sub-divisions had 2.3, 24 and 73.7 percent of the total number of construction businesses, and their percentage increases over four years were 5, 20, and 13 percent respectively. 

 

Construction businesses are more likely to exit or become insolvent because two thirds are micro or small businesses employing less than 5 people, which have a higher rate of insolvency than larger businesses. Subcontractors are also vulnerable to the knock-on effects on their capital and cash flow of a contractor’s insolvency, where many of the unsecured creditors will be subcontractors. Although exit rates are not the same as insolvencies, the ABS data is good evidence of a much higher rate of insolvencies in the micro and small businesses that are the great majority of construction firms. This is an important piece of context that should be taken into account when considering insolvencies. 

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Incremental Innovation in Construction

 The example of concrete

 

Construction of the built environment has an interlocking set of economic, political, legal, and social barriers that make innovating difficult. As long as current technology meets the expectations of clients and users for prices and dominant products, there will be significant market imperfections such as network economies, lumpiness, split incentives, requirements for collective action, and transaction costs that inhibit diffusion of more efficient, advanced technologies. There is also an institutional structure that imposes regulatory hurdles or other policy disadvantages, favours existing technology or discourages new entrants, and a financing system based around incumbents. Educational curricula, career paths, and professional standards use existing technology. And because organizations, people and technical standards are embedded within a production system, the tendency is for technologies to develop along defined trajectories unless or until deflected by a powerful external force.

 

Construction of the built environment is a project-based system of production with complex professional, organizational, contractual and working relationships, and is geographically distributed. Moreover, the context is one of wider networks containing many small and medium size firms with a range of organizational and institutional relationships, where external contracting is common. All these factors are seen as inhibiting, although not preventing, innovation and diffusion of new technology. Within such a system incremental innovation improves industry products and processes without affecting the structure of the system. 

 

In construction, many technical advances have come from materials suppliers or component, plant and equipment manufacturers, who have been responsible for the introduction of new products and equipment, such as excavators, cranes, facades and lifts, using incremental innovation directed at improving existing products and processes. Across the construction supply chain firms don’t create new industrial networks to develop or exploit new technologies such as lifts and elevators, glass facades, and interior wall systems, instead these firms become part of the existing network, which is the modern construction production system. As a well-developed industrial system many of its sub-markets are expected to be concentrated and oligopolistic, with a few large, well-established firms exactly like those economic historian Joseph Schumpeter suggested would be most likely to engage in R&D, invention and innovation.

 

The process where inventions are developed, tested and extended, and finally put into production is one of incremental innovation. Firms refine specific parts of a production system, usually in response to something changing elsewhere in the system as production and distribution methods evolve over time, step by step. Although this form of innovation is incremental, it should not be dismissed as unimportant. Examples are the increase since 1950 of mining truck loads from 4 to 400 tonnes and the increase in lifting capacity of tower cranes to over 1,000 tonnes. Another example is the development of computer-aided design (CAD) software, which went on for two decades before Autodesk was started in 1982, one year after the first IBM PC. Over the decades Building information models (BIM) have advanced through 2D and 3D versions to the 4D (schedule) and 5D (cost) iterations today. Now software linked to cameras on helmets or drones can provide real time augmented reality (AR) images from a building site linked to the BIM model of the project.

 

Building and construction products and processes are the outcome of a long development path. Many of the industry’s global leaders are well-established, Bechtel for example is over 100 years old, and other firms like Hochtief, Skanska, and AECOM can trace their origin stories back over a similar period. Shimizu is over 200 years old. Most of today’s manufacturers also have their roots in nineteenth century firms. It’s a remarkable fact that construction today is a production system that has been developing for more than 150 years, since the arrival of steam, steel and concrete, using incremental innovation to gradually improve products and processes. 

 

In the industry life cycle, after emergence and the initial growth stage, technology stabilises around standardised products and processes. In many cases industries are oligopolistic, with a few specialized firms in market niches or layers in the supply chain. Consolidation leads to industry concentration with large firms dominating their markets, the car industry is an example. Construction materials like cement, concrete and glass, and components like building management systems, interior walls, plumbing fixtures, lifts and elevators are all oligopolistic industries in an established supply chain.[i]

 

 

Incremental Innovation: The example of concrete 

 

The development of concrete is an example of how effective incremental innovation in construction can be. By the 1880s the increasingly widespread use of concrete had changed its status from hobby to a modern industry, as scientific investigation into its material properties revealed its shear and compressive characteristics. With the development of reinforced concrete there was change in architectural concepts of structures and approaches to building with concrete. The industrial standards of concrete technology influenced ways of thinking based on building systems and standardized building elements. These became identified with what was known as the Hennebique System, a simple to use system of building with reinforced concrete columns and beams patented in 1892. By 1905 Hennebique’s system had spread across Europe and elsewhere and his company employed 380 people in 50 offices with 10,000 workers onsite.[ii]

 

Concrete then set the agenda for the development of construction as a technological system over the next hundred years driven by the modernist movement in architecture, as it explored the possibilities of these material for increasing the height and scale of buildings, and modern construction materials and methods.[iii] For over one hundred years, since Hennebique, there has been ongoing refinement and development of the world’s most widely used construction material, as shown in Table 1.

 

Concrete shows how incremental innovation in materials played a significant role in the reorganization of site production methods as mixers, pumps and chemicals were refined and developed in a long process of interconnected innovations. One of the characteristics of a successful technology are these spillover effects, with advances in one industry leading to complimentary developments in related industries. 

Table 1. Incremental innovation in concrete since 1800

Source: Jahren, P. 2011. Concrete: History and Accounts, Trondheim: Tapir Academic Press.

Innovation is continuing today with 3D concrete printing (3DCP). Research into 3DCP has focused on developing the equipment needed and the materials used, and by 2019[iv] over a dozen experimental prototypes had been built. By 2022 the commercialisation of 3DCP was underway, with two types of systems available. One using a robotic arm to move the print head over a small area, intended to produce structural elements and precast components, the other a gantry system for printing large components, walls and structures. 3DCP combines BIM models, new concrete mixtures and chemicals, and new printing machines. Again, a combination of new materials and new machinery is required for this technology to work.

 

In 2022 the Additive Manufacturing Marketplace had 34 concrete printing machines listed, ranging from desktop printers to large track mounted gantry systems that can print three or four story buildings. Companies making these machines are mainly from the US and Europe, and Table 2 also has details on the type and size of a selection of machines. There are also several companies offering 3DCP as a service at an hourly or daily rate.[v]

 

Concrete printing is only one part of the development of additive manufacturing. In mid-2022 the Additive Manufacturing Marketplace listed 2,372 different 3D printing machines from 1,254 brands. The number of printers and materials used were: 364 metal; 355 photopolymers; 74 ceramic; 61 organic; 34 concrete; 24 clay; 20 silicone; 19 wax; and 19 continuous fibres. Many of these printers could be used to produce fixtures and fittings for buildings. Producing components onsite from bags of mixture avoids the cost of handling and transport, and for large items avoids the load limits on roads and trucks. There are also printing services and additive manufacturing marketplaces being set up. These link designers to producers with the materials science, specialised equipment and print farms capable of large production runs and manufacture on demand. Examples are Dassault Systems 3DExperience, Craft Cloud, Xometry, Shapeways, 3D Metalforge, Stratasys and Materialise.

Table 2. Some companies making 3D concrete printers

Source: Additive Manufacturing Marketplace, 2022. 

 

 

Conclusion

 

Innovating in a complex, long established industrial sector like construction of the built environment can be difficult. The institutional architecture can impose regulatory hurdles or other policy disadvantages on new technologies, and government expenditures often support existing technology. Lenders are risk averse. There are subsidies and price structures that favour incumbents and ignore externalities like the environment and public health. Educational curricula, career paths and professional standards are oriented to existing technology. The dominance of existing technologies is further reinforced by imperfections in the market for technology such as network economies, lumpiness, split incentives and the need for collective action.[vi]

 

The construction industry has become used to incremental innovation and a gradual rate of change since the modern industry emerged over the last few decades of the nineteenth century. At the beginning of the twentieth century there was a great deal of resistance to change: ‘the older assembling industries like engineering were slow to change. Each firm took a proprietary pride in its own work’, and the trades were ‘fearful of technological unemployment and fought all changes in conditions of work.’[vii] Nevertheless, by the 1920s construction had reorganised the system of production around concrete, steel and glass. 

 

We are at a similar point today. The development of digital construction using combinations of BIM, offsite manufacturing, 3DCP, drones and robots, is an emerging new system of production, and the adoption and adaptation of these technologies will depend on incremental innovation continually improving their performance, which can only happen if they are put to use. There is a strong case here for public clients, who will be major beneficiaries of the improved efficiency of digital construction, to sponsor demonstration projects that use these technologies and measure the improvements in waste, carbon, defects, time and cost that are delivered. 

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[i] Syverson, C. 2019. Macroeconomics and Market Power: Context, Implications, and Open Questions, Journal of Economic Perspectives, 33, 3, 23–43. Syverson, C. 2008. Markets: Ready-Mixed Concrete, Journal of Economic Perspectives, 22, 1, 217–233.

[ii] Pfammatter, U. 2008. Building the Future: Building Technology and Cultural History from the Industrial Revolution until Today. Munich: Prestel Verlag.

[iii] Cody, J. 2003. Exporting American Architecture 1870-2000, London: Routledge. 

Huxtable, A. L. 2008. On Architecture: Collected Reflections on a Century of Change, New York: Walker Publishing Company.

[iv] Sanjayan, N. and Nematollahi, B. (eds.) 2019. 3D Concrete Printing Technology: Construction and building applications. Butterworth-Heinemann.

[v] https://www.aniwaa.com

[vi] Bloom, N., Van Reenen, J. and Williams, H. 2019. A toolkit of policies to promote innovation. Journal of Economic Perspectives, 33(3), 163-84.

[vii] Hughes, T. P. 1989: 495. American Genesis: A Century of Invention and Technological Enthusiasm 1870-1970, Chicago: University of Chicago Press.