Ten years after the global financial crisis, the United Kingdom (UK) building industry
seems to be recovering. House-building projects that had stopped because of fears about
profitability have now been re-started. New building projects have also begun as
consumer incomes have started to increase. The UK government announced a plan in
2017 to build 300 000 new homes a year to try to solve the problems of a housing
shortage in the UK. This should be good news for workers involved in the building
industry. However, the UK still suffers from difficulties linked to planning and building
regulations. These limit the ability of house-builders to develop new land for homes. The
skills of bricklayers and plasterers are still in high demand but there are fears that certain
manual jobs may be carried out by machines in the future. Added to this are concerns that
the UK’s exit from the European Union may lower consumer and business confidence
again.
Using Figure 1, assess whether changes in the UK economy are likely to be beneficial for UK
builders. (upper band 9 marker answer)
One change in the UK economy that is likely to be beneficial to UK
builders is the increase in consumer incomes. this may lead to an increase
in demand for buildings such as houses and offices, and therefore as
labour is a derived demand, an increase in workers (such as builders)
needed to fulfil the extra demand. This will mean that builders may have
more secure and consistent jobs (as they are not unemployed for long
periods of time searching for work - reducing frictional unemployment)
and in addition, because builders require training (so the price elasticity of
labour supply is inelastic), the increase in demand will result in increased
wages for builders as UK construction firms compete for labour.
One change in the UK economy that may cost builders in the UK is the exit
from the European Union. This is because many builders are lower cost,
immigrants from the EU that due to BREXIT may have to return home and
so lose the higher wages and greater opportunities the UK provides.
While this will result in an ultimate loss for a huge chunk of UK builders,
those who are able to stay may experience higher salaries as the builder
supply will be lower, as demonstrated by a shift to the left on the supply
curve.
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