What is the construction industry
Building, Construction & Construction Industry: The Most Important Facts
The appearance in cities and in the country has visibly changed in recent years as a result of numerous construction projects. As one of the most important sectors in Germany, the construction industry not only creates new structures, but also makes a significant contribution to value creation. Reason enough for us to take a closer look at how the German construction industry is positioned.
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The German construction industry scrutinized
The media keep reporting how important the German construction industry is. But how significant is it actually in Germany? We want to put the cards on the table on the basis of statistically collected data by well-known external providers:
Significance and economic assessment of the construction industry
A large number of companies in the construction industry are constantly creating new office space, living space and infrastructural buildings. Gross value added is a key figure that expresses its relevance within the German economy. It is made up of the difference between the values produced minus the preliminary work that has already been carried out. In this way, it characterizes the pure added value that is generated in the respective industry. According to surveys by the Federal Statistical Office, the total gross value added in Germany amounts to € 3.11 trillion (2019). Of this, € 174 billion, i.e. 5.6%, of gross value added is attributable to the construction industry. Judged purely on the basis of these figures, its share in gross value added is therefore rather small.
But we must not forget that all services in the construction industry continuously and for years provide valuable benefits in various areas of life. Last but not least, they create space for their added value in other areas of the economy. Construction investments speak for flourishing growth: at least since 2015 they have been increasing continuously. Investments are mainly made in residential construction: 61% of all construction investments went into this area in 2019. Commercial construction accounts for 27% and public construction for 12% of construction investments.
Construction and ancillary trades account for the largest share of construction investments with 63%. The remaining percent is mainly distributed among the manufacturing industry, service providers and private households. Undeclared work is also included in addition to private household contributions.
Speaking of the various top performers: In 2020, around 2.6 million people will be employed in construction. That is 5.8% of all employed persons residing in Germany. This doesn't just include the construction workers you see whizzing across the construction site. Architects, engineers, all planning or administrative employees in construction companies and many others make the construction industry a multi-faceted branch of the economy.
Promising developments despite the corona pandemic
The construction boom in recent years has ensured growth, investment enthusiasm and a real boom. The corona pandemic, a very drastic social event, turned many industries upside down in 2020. Only the construction industry does reasonably well. Despite all this, a sales increase of 2% was achieved for 2020. A minimal decline in sales of 1% is expected for the following year.
The construction industry can retain its particular strength because lockdown provisions had little effect on day-to-day business in the construction industry. Orders are generally processed over a period of months or years. With the order books full, there was still enough to do at first. Even if the order situation changes structurally, movements in the opposite direction continue to lead to a positive mood. Public and commercial clients are behaving cautiously, but demand in residential construction continues to rise. An area that already dominates the construction industry. And the industry is also very optimistic when it comes to the number of employees: Construction companies are planning to invest more in employees and training positions. Overall, Corona only had a limited impact on the construction industry.
The largest construction companies
Starting with a small company with a handful of employees, through medium-sized companies to large companies with global corporate structures: In the construction industry you will find various types of company that all contribute to added value. Which companies are at the top and what sets them apart? We take a look at the top 3 construction companies in German-speaking countries:
The world's largest construction company is Hochtief AG. Hochtief is an originally German company from Essen, which can look back on more than 100 years of history. The success is no coincidence: Well-known buildings such as the Elbphilharmonie in Hamburg, the Commerzbank Tower in Frankfurt am Main and a few other skyscrapers stand for top-class performance. There are also breathtaking bridges, futuristic metro stations, modern airports - mainly in Europe, North America and Australia.
The streets of tomorrow will most likely be designed by Strabag AG. With its focus on civil engineering and road construction, this company is also one of the most important companies in Germany. Construction projects are also carried out in Austria as well as in Southern and Eastern Europe. Innovations to improve the material quality of roads or traffic safety are one of the many competencies that distinguish the company as a pioneer in road construction.
Bilfinger from Mannheim is important for large industrial and infrastructural projects. In addition to setting up high-tech systems, the company also offers the right service. This expands the value chain in a meaningful way and enables a much shorter process for the successful and trouble-free operation of the systems. Bilfinger answers challenging tasks with the development of the latest technologies, which is undoubtedly one of the company's many decisive success factors.
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Salaries and wages in the construction industry
Construction workers receive either wages or salaries. Administrative employees usually receive a salary. Those directly employed in construction, on the other hand, receive wages: the construction wages, to be precise. The construction wage as a special form of remuneration may be composed somewhat extensively, but various components combine a variety of advantages. First of all, the general statutory minimum wage and, depending on the industry, an individual industry minimum wage apply. The intention behind this is to protect local employees from price drops. In the course of globalization, German construction companies are increasingly competing with other companies around the world. Last but not least, they also compete for price, which, depending on the construction project, is more or less reflected in the construction costs.
In addition, there are additional special payments for the building wages, which in most cases are covered by social security funds. The obligations and the necessary contribution payments are an issue in themselves. With these payments, employees in construction are guaranteed income, even if, for example, there is a risk of temporary dismissal due to seasonal short-time work. Of course, this also has advantages for employers if a higher-level institution is there to compensate for this. In times of a bad order situation, managing directors do not necessarily have to leave good specialists to the job market immediately, just to look for new top talent again after a short time.
Construction: the most important terms explained
You have probably heard of main and ancillary construction trades because their use is widespread. Surprisingly often, however, it is not entirely clear what exactly is meant by the terms. At least if we explain the exact definition to you right away, you will quickly find that the terms are as good as self-explanatory - as a little donkey bridge, in case you come across it again. But first we create a demarcation between the building trade and the construction industry.
Construction vs. construction industry: we explain the differences
The terms building trade and construction industry are often used as synonyms. Especially when you are looking for information quickly, the results are not always displayed clearly. So that this no longer leads to confusion, we bring light into the darkness: Let us first agree that the two terms building trade and construction industry are defined by the companies covered by them. This results in a clear demarcation:
construction industry unites craft businesses that are at least members of a chamber of commerce.
On the other hand, the Construction industry Medium-sized and large companies, which are each member of the IHK, the Chamber of Industry and Commerce.
What is the main construction trade?
Construction: That sounds big and powerful. It is definitely. As an essential part of the construction industry, shell construction work is predominantly carried out within the main construction trade. This includes the following sub-areas:
- Civil engineering
- Civil engineering
- Roofing and carpentry
- Road and landscaping
- Scaffolding and facade cleaning
This means that in the main construction trade it is about the erection of buildings in structural engineering, construction projects in civil engineering and especially in civil engineering. In addition to the construction, maintenance, refurbishment, renovation and dismantling are to be understood as equally. Section 1 (2) of the Construction Ordinance summarizes all of the companies and operational departments associated with the main construction trade.
What does all of that fall under construction ancillary trades?
The ancillary construction trade can be clearly distinguished from the main construction trade. It also plays a major role and is further divided into two areas: the finishing trade and the auxiliary trade.
In which Finishing trades it is about expansion work that can be very detailed and multi-layered. Whether electrical work, the connection of heating and sanitary systems or painting work. We could now list a lot more, everything that counts for a modern extension of built structures. You will find the list within the classification of economic sectors, edition 2008 (WZ 2008) in section F.
The Construction auxiliaries is another defined area within the construction industry. It includes physical preparatory work and services relating to the implementation of planned construction projects. Before a cellar can be built, for example, the ground must be dug and the rubble cleared. This, too, is just one example of many that really round off the development of construction projects.
Associations: Organizations for a strong construction industry
The construction industry would not be as strong if various interest groups could not exchange views on one organization. Because where else do the many trades and employees that we mentioned in the course of the article come together to actively help shape the future of the construction industry? From the large associations to small organizations such as the industrial union Bauen Agrar Umwelt IG Bau, every specialist will find a suitable representation of interests. In the following, we would like to introduce you to two important organizations.
ZDB: Central Association of the German Building Industry e.V.
One of the most important building trade organizations is the Zentralverband des Deutschen Baugewerbes e.V., or ZDB for short. The association represents thousands of medium-sized construction companies from all over Germany vis-à-vis politics and the public. The members exchange information directly with the Federal Government and the Bundestag. The spectrum is very broad, which the ZDB is actively committed to: Representing economic and technical interests is one of the core areas that will probably be the most exciting in relation to the day-to-day business of a construction company. In doing so, they do not neglect socio-political and cultural interests. Even if this sometimes doesn't seem so important, it nonetheless ensures a holistic view of companies, people and their needs.
The ZDB is also involved in standardization and is therefore an important link between the legislature and the construction company. It relies on the promotion of training and further education measures as well as research and development. In order to stay up to date, current press releases on the construction industry as well as specialist magazines and publications are published on a regular basis. It is worth taking a look at the website to be well informed.
If you are looking for a closer connection to this organization, then one of the 30 national and professional associations will be the right address for you. All over Germany, you will find contact persons here who will respond to your concerns with competent support. Its members advise on different levels: from a legal point of view and also on some economic issues.
Main association of the German construction industry
The main association of the German construction industry is also one of the most important organizations for the construction industry in Germany. Various regional associations as well as specialist associations form the entire association. The focus is on representing the interests of medium-sized construction companies and large corporations. The main association acts as a business association throughout Germany and Europe with an important position vis-à-vis legislators and the government.
Maintaining high construction quality across the entire value chain is one of the stated goals. The same goes for the needs-based investment policy of the public sector and the co-creation of the procurement guidelines and contractual framework conditions. At the same time, the main association also acts as an employers' association. This means that he has a share in collective bargaining and in enforcing the minimum wage.
Contrary to what you might think now, the association is also involved in various social issues. Sustainable building and environmental protection, socially responsible management and the creation of a good level of training are just a few of the topics covered.
Digitization in the construction industry: the path towards a progressive future
Most of you probably have a smartphone and use many helpful apps to make your life easier. In various areas of life, digitization has led to a more or less pronounced change. Less actually so far in the construction industry. One more reason to be in the starting blocks full of excitement and look forward to many efficient solutions that are just waiting to make day-to-day construction work more economical.
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Many of the innovations that are emerging within the construction industry are not all that new. Numerous other industries have already paved the way with their ideas, from which the construction industry can benefit directly. What it takes is the courage to apply digital concepts, the willingness to familiarize yourself with new topics and the know-how to evaluate the benefits for your own company. We know that this is not always easy. But sticking to it pays off in a later gain in time - with every passing day.
Whether it is artificial intelligence with which you can cleverly derive future forecasts based on past data or digitally map overarching management processes in a BIM. The possibilities are varied. If you want to be one of the winners of digitization with your construction company, you cannot avoid dealing with the issues in detail. However, we can very well understand if all of these concepts seem too much to you at first. In that case, you can start with a first effective variant: the introduction of construction software. Cloud-based solutions and web-based applications provide you with a gain in time and clarity in different areas of your company. This can even be implemented without investing a lot of money or in building up your own technical resources.
Take advantage of these advances so that your company can enrich the construction industry with your efficient services over the next few years. And of course, so that you can secure a stable company for yourself and your employees. We have therefore developed a guide especially for managing directors, so that success in the construction industry is possible for even more entrepreneurs. Simply download the tips as an eBook - free of charge and without obligation.
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