There is no doubt that construction is a burgeoning industry in Australia. A colossal ramp up in government spending on infrastructure, coupled with a housing and population boom in metropolitan areas with seemingly no end in sight, makes for a very healthy state of affairs for construction.
As noted by the federal Department of Industry, Innovation and Science, overall growth in the construction sector was up for 2016, with residential construction partially offsetting construction decline in mining states, such as Western Australia and Queensland. Construction currently makes up 8.1% of Australia’s total GDP (gross domestic product), making it one of our most vital industries economically.
A boom in metropolitan areas with seemingly no end in sight, makes for a very healthy state of affairs for construction.
But with growth comes an inevitable emergence of major industry players, with sector concentration up for discussion.
In part two of Jobsite’s investigation into StartupAus’s report, Digital Foundations: How Technology is Transforming Australia's Construction Sector, we spoke with Alex Gruszka, COO of StartupAus. Gruszka shared his read on the impacts of concentration in the Australian construction sector.
Concentration Encouraging an Innovative Attitude
According to the report, Australia’s construction sector is made up of 345,480 businesses, with the top 20 firms accounting for 68% of contracts won.
“Rather than being a negative, the centralisation of the sector is an important factor in the sector’s propensity to adopt technology,” says Gruszka.
“The major benefit is that the Australian construction technology scene is characterised by a particularly collaborative environment. Australia startups do not have the capital or expertise to take on billion dollar construction projects themselves. Rather, they are looking to provide technological solutions to specific pain points for established players.”
“The major benefit is that the Australian construction technology scene is characterised by a particularly collaborative environment."
What this means, in Gruszka’s opinion, is an increase in established players engaging with digital startups, as they look to collaborate and support digital solutions that can be integrated into their owned platforms.
“There’s a wealth of startups at the growth stages who are actively developing their technology in collaboration with established industry firms. It’s a powerful combination,” says Gruszka.
Avoiding a Safety Net Within a Concentrated Sector
But it’s not all good news, as the report delves into the associated risks of a highly-concentrated sector, too. According to Gruszka, one of the major negative impacts of concentration is a safety-net developing around the established players, leading them to feel “untouchable,” and neglecting a need to innovate.
However, most of the economic drivers in the construction space render that outcome unlikely.
“Since profit margins are low and the cost of labour in Australia is very high, innovation is naturally encouraged, even for entrenched players,” notes Gruszka.