Construction sector concentration: Evidence from Britain

For the first time, empirical estimates of concentration in the British construction sector are provided. The research adds value to published DETR/DTI data on the structure of British construction by applying a novel technique for estimating the concentration ratio proposed by McCloughan and Abounoori (MA) (2003). The MA method is applied because the data are grouped and simple summing of the largest market shares is not possible in this case. Results are provided on the trends in aggregate concentration (1971-99), concentration by main trades (1980-98) and concentration by specialist trades (1980-99). The first main finding is that aggregate concentration is low in British construction. This confirms the popular view, namely that construction is a fragmented sector, with the vast majority of private contractors operating at a small scale. The second main result is that concentration among main trades is also low. However, the same cannot be said of concentration among specialist trades - the third main result. The analysis shows that certain specialist trades (scaffolding specialists, asphalt and tar sprayers, constructional engineers, insulation specialists and demolition specialists) are relatively concentrated, even in the context of a national geographic market. These specialist trades experienced sharp rises in concentration in the latter half of the 1990s. The results suggest that the British construction sector is dynamic and comprises many diverse markets in terms of their levels and trends in concentration.