Amid the recent boom in housing and infrastructure construction, the latest data shows that Australians poured en-masse into building and construction related enterprises.

Released last week by the Australian Bureau of Statistics, the Count of Australian Businesses revealed that the number of Australian businesses operating in construction increased by 9,302 during 2018/19 to go from 385,273 at June 30, 2018 to 394,575 at 30 June 2019.

Whilst 54,315 businesses left the industry, this was more than offset by 63,617 new construction businesses which started up.

All up, Australia’s construction sector has gained almost 50,000 new businesses over the past four years (see chart).

The data also showed that:

  • There were more businesses in construction as of June 2019 compared with any other industry (see chart).
  • Business entry and exit rates were slightly higher in construction compared with most other sectors of the economy. All up, entry/exit rates for construction stood at 16.5 percent and 14.1 percent respectively. This compares with 15.4 percent and 12.7 percent for all industries.
  • Construction businesses are predominately small. All up, 98.53 percent of all construction businesses are either non-employing businesses (59.09 percent) or businesses employing between 1 and 19 staff (39.44 percent).
  • House construction was the most common form of construction business, accounting for 12.35 percent of all construction businesses. This was followed by carpentry (12.01 percent), electrical (10.97 percent), plumbing (6.92 percent) and multi-residential building (6.25 percent).

Housing Industry Association Chief Economist Tim Reardon says the surge in construction businesses has been driven by several years of unprecedented levels of activity in new home building as well as a large volume of work in public infrastructure projects.

Going forward, however, he says business numbers may well drop back as a pullback in dwelling construction leads to market consolidation.

Asked about the relatively high entry and exit rates of businesses in construction as opposed to other industries, Reardon cited several factors.

With construction employing around one in ten Australians, a large number of Aussies will have involvement with the industry at some stage in their lives.

This, along with low barriers to entry and the cyclical nature of the market, enables people to flow into and out of construction businesses as the building cycle ramps up and down.

As well, the sector by its nature is decentralised and typically lends itself to a large number of smaller businesses – many of whom subcontract and operate in specialised areas.

Being small, these operations are relatively easily established when the need or opportunity arises and also relatively easily closed down when work dries up.

Asked about the high number of businesses in construction compared with other sectors, meanwhile, Reardon said consistent shortages within many categories of trade over recent years is encouraging new apprentices into the sector.

Once these people attain certification, many choose to set themselves up as independent subcontract businesses and enjoy the benefits which this independence delivers.