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Production of the Built Environment

Industries, Clusters and Sectors

Parts of the economy that involve many different contributors and participants are often called an industrial or economic sector, an example is the non-profit sector with its wide variety of organisations. Although the idea of an industrial sector has no precise meaning, it is often used to describe a loose collection of firms with one or more common characteristics, like ‘manufacturing’ or ‘the business sector’, though firms in these sectors come from many different industries.

The starting point is the concept of an industry, which is defined in the Standard Industrial Classification (SIC) used by national statistical agencies as a group of firms with common characteristics in products, services, production processes and logistics. These firms are classified into a four-level structure. The highest level is alphabetically coded divisions such as Agriculture, forestry and fishing (A), Manufacturing (C) and Information and communication (J). The classification is then organised into two-digit subdivisions, three-digit groups, and four-digit classes.

The boundaries around an industry are tightly defined by the SIC, to allow identification of individual industries as producers of goods and services and measurement of their contribution to output and employment in the economy. However, to produce something supplies are needed, purchased from other producers, and these relationships between industries are also important. For example, bricks are manufactured products supplied to property developers to provide buildings for their customers. Many industries are structured around such supply chains and production networks, and when enough firms share sufficient characteristics they are often described as an industry cluster.

An industry cluster brings together a group related firms, and was originally applied in the 1990s to specific locations like the wine industry in California’s Napa Valley or Bordeaux in France. Over time, the concept itself broadened as different types of clusters were identified, such as creative industry hubs or knowledge centres. Two types of industry cluster are:

1. Geographical – industries using the same resources in a specific location

  • Movies – Hollywood US, Bollywood India;

  • IT – Silicon Valley CA., Silicon Alley NY., Silicon Glen Scotland, Bangalore India;

  • Leather goods, spectacles and glasses – Italy;

  • Health – Boston US, Oxford England, Chennai India;

  • Electronics – Guadalajara Mexico, Cordoba Argentina, Guangdong China;

  • Finance – London England, New York US, Geneva Switzerland; and

2. Vertical – a hub and spoke value chain from suppliers to end products

  • Automotive – Detroit US, Dusseldorf Germany, Turin Italy, Curitiba Brazil

  • Aerospace – Toulouse France (Airbus), Seattle US (Boeing)

  • Smart phones – Guangdong China (Apple), Hanoi Vietnam (Samsung)

Some industries do not have central locations like the clusters in IT, wine, finance etc., or major hubs where production is concentrated like automobiles and aerospace. These industries are built around decentralised production, distribution and delivery networks that make their products widely available to clients and customers. Four examples are:

  • Pharmaceuticals – a globally distributed industry, with countries combining some form of domestic production and imported supplies;

  • Shipbuilding – brings many suppliers together in a few locations;

  • Electricity generation – brings many suppliers together in many locations;

  • Building and construction – the world’s most ubiquitous industry, sharing the most widely used materials of wood, clay, glass, steel and concrete. Is this really a cluster?

Building and construction, in fact, is only one of the many industries involved in the production of the built environment. There is a diverse collection of industries that create, manage and maintain the built environment. On-site work links suppliers of materials, machinery and equipment, products and components, and all other inputs required to deliver the buildings and structures that make up the built environment. Consultants provide design, engineering, cost planning and project management services. Once produced, buildings and structures then need to be managed and maintained over their life-cycle, work done by another group of related industries. The built environment also needs infrastructure and services like water and waste disposal, provided by yet more industries.

A dense network of many different firms and participants such as this is often called an industrial or economic sector, because it is too diverse and distributed to be a cluster. There is no definition of an industrial sector, beyond a broad collection of firms with one or more common characteristics, like ‘manufacturing’ or ‘the business sector’, though firms in these sectors come from many different industries. There are also sectors based around a definable market, two examples being:

  1. Defence - there is no defence ‘industry’ because suppliers come from many different industries like IT, aerospace and shipbuilding, but as a sector share resources and clients; and

  2. Tourism - which brings together the contributions of industries like accommodation, tour operators and entertainment. This is why the tourism sector has an annual Tourism Satellite Account produced by the ABS each year.

If the built environment encompasses the entirety of the human built world, then the built environment sector (BES) is the collection of industries responsible for producing, managing and maintaining the buildings and structures that humans build. To be included in the BES an Industry needs a direct physical relationship with buildings and structures. Those industries can be divided into those on the demand side and those on the supply side, like materials or specialised tradesmen, Demand side industries like property developers and facility managers pull output from the supply side, both for new output and for servicing and managing existing assets. Therefore the BES is a sector more like defence than tourism, because it also produces long-lived assets for clients outside the sector (governments and owners respectively) that require repair and maintenance, and that R&M generates significant ongoing revenue for firms across the broad industry sector that produces those assets.

A final requirement is that data on the industries included in the BES needs to be available at a level of detail that separates out BES components of industries like manufacturing and professional services. Generally, this excludes industries such as transport, legal and financial services. These industries clearly play a role in the BES, but that role is hard to identify in Industry statistics because of the level of aggregation in the data. Another complicating issue is that industry-level statistics can vary greatly across different releases by an agency, due to the different data sources and methodology used, and also between countries, whose national agencies typically use their own version of the SIC.

The concept of the BES is broad and extensive, so cannot be precise and exact. While the boundaries of industries and markets are important, in practice the data and SIC definitions are the starting point for the data used. The industries included are selected because they clearly have a relationship with construction, management and maintenance of the built environment. This may not capture every last contribution to the BES, but it does allow the development of a profile of the sector. Measuring the BES provides data on its relationship to the wider economy, and is relevant to a wide range of policies and issues currently facing the built environment.

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About the Blog

This blog is concerned with the organisation of the building and construction industry, in the economic sense of combining factors of production to create output.


The modern industry's origins in the 19th century can still be seen in many of its characteristic features, and many contemporary issues are also found in projects from the past.


Like many industries, it is being reshaped by unprecedented rapid and widespread advances in materials, technology and capability.

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