THE DIVISIONS OF THE CONSTRUCTION INDUSTRY
Some of the various areas of activity are: -
Residential Construction Service Industry Construction Tertiary and commercial construction Industrial construction Rural construction Roads and other infrastructures Cultural and environmental properties
The companies in the sector in Italy work in the following activities: •
Completion of new buildings;
Architectural and monumental conservational restoration;
Provisional and safety works;
Bearing structures (reinforced concrete including prefabricated, metallic structures, masonry);
Finishing and completion of works (roof coverings, waterproofing and isolation, plastering, flooring and upholstering, fixtures and windows, staining and various other finishes, iron works, stone cutting);
System installations and wiring (thermal plumbing including air conditioning/heating, electric, electronic, telecommunications, lifting and alarms).
CURRENT SITUATION AND TRENDS In the last 50 years, the construction industry played a central role in the evolution of the Italian economy, due in part to its close interdependence with other fields in the industrial sectors. Starting in 1996, strong allotted investments in non residential construction and fiscal incentive policies made by national governments for residential construction renovations encouraged the development of this sector.
Looking at the trend of construction in Italy in the last 50 years we can say that: • • • •
From 1949 to 1964, due to post war demands for renovation and the construction industry went through a period of great expansion including infinite job offers and scarce technological innovations. From 1965 to 1980 there was a gradual recession that came to a straight collapse in the building market. From 1981 to 1990 a modest increase was noted and then from 1991 to 1995 there was a five year stretch of profound crisis that had never happened before in this sector, due to lack of funding for public works. Then in 1996 the first positive signs began to appear thanks to elevated investments in the non residential construction division (social, scholastic and health care structures, public works such as airports, communication ways, ports and aqueducts). From 1997 on, fiscal incentives were introduced for building renovations (Law 27 of December 1997 n. 449) with a possibility for up to 41% tax deductions for numerous interventions in the constructions field. This lead to new sector growth. From 2000 on the construction industry has been in a phase of expansion. Ulterior fiscal aids were provided for the purchasing of service materials, which gave stimulus to the field.
The growth of investments in construction in the last years was clearly higher than that of the Internal Gross Product. Also, the rate of occupational development in this sector (+17% from 1998 -2003) was double that of the entire economic system. Even though 2003 was a year of idleness ad recession due to the economy, the construction industry reported a growth of 1.6% even though there was a slight slowdown in respect to the previous year (which reported a growth of 2.3%). Currently, following the international crisis, the construction field is in an idle phase. The artisan companies are ones most affected by this generally idle situation in the entire construction division and, despite the expectations of recovery, they are finding it hard to take off. They are reporting modest turnovers and a strong competition amongst companies, as well as a pulverizing productivity associated with extreme isolation that is making any form of synergy and cooperation impossible. A low use of new technologies has been reported along with a steep drop in prices by the majority of companies trying to win more jobs. Naturally there are differences between the various regions in Italy: the Veneto region has recorded a high number of substantial sized companies and is much more inclined to investments. As a matter of fact, the general crisis has not been felt by the artisan construction companies in the north east regions. The mostly positive data from the Veneto and Friuli regions refer to the companies that purchase directly from the seller (mother companies); in the region of Lazio, subcontracted companies are actually the ones that have recorded the best performance in this period. Nonetheless, in the construction division the distinction between two categories of companies is rather weak and subject to strong changes: the companies that purchase directly from the sellers, also work as subcontractors and vice versa and the percent of jobs completed under one condition or the other can change with extreme ease.
The dragging economic strength of the divisions originates in more structured companies that have between 4 and 19 workers. Regarding the types of company interventions and the composition of the turnovers, we are noting a heavy growth of interventions on old buildings (restoration, renovation, maintenance and repair) with respect to new constructions. Such tendency can be explained by the drop in housing demand compared to the past, due to the reduction of investments that favor limited sized interventions and a general tendency to improve the already existing buildings rather than the creation of new ones. Another critical aspect is that of the low education level of construction workers which is making it difficult to recruit a qualified work force especially in the north east regions along with the unsatisfying structuring of qualification policies and refresher training. To summarize, the current market characteristics are: − Uncertainty of the new building market; − Market growth in recovery, maintenance and substitution; − Reduction of the range of shares in the majority of companies (provincial range); − A gap compared to the other European countries related to the public presence in housing; − The construction process includes a growing number of companies and specialists; − The organization is difficult and whoever is at the top of the process doesn’t have a clear view of the constraints of the operative problems of whoever is at the bottom; − The complexity of criteria and of job allocation systems if growing. The situation in the construction industry in Italy is critical in this moment: the information from the National Statistical Institution (ISTAT) confirms the difficulties of the companies with a drop in employment levels. In the second quarter of 2009, there was a 2.1% drop compared to the same period in 2008 which is equivalent to a total of 41,000 less workers. The quarterly index in June 2009 on the production of constructions recorded a drop of 3.2% compared to the previous quarter, and a 12.3% drop compared the first quarter of 2008.
THE PHENOMENON OF IMMIGRATION The presence of immigrants in Italy is strongly correlated with the construction industry. The introduction of foreign workers accomplishes two tasks: − equivalence of generational turnover, compensating for the workers that retire and the decrease in population; − a complimentary role in order to compensate for the abandonment of young Italians in the construction field due to loss of interest. 17% of foreign workers working legally in Italy are in the construction field but the percentage is variable from zone to zone, reaching up to 50% in northern Italy. In 2006 foreigners made up 12.6% of the total workers in the construction industry. It is significant that in that same year, a 2.4% drop in total construction workers was reported compared to the previous year but there was a 22% increase of total foreign workers. Immigrants work mostly as masons or manual laborers, introducing themselves into the job market most often without any specific qualifications. Companies that hire
foreigners make up the majority of small and medium sized companies (less than 50 employees). In reality, a macroscopic phenomenon of black market labor with illegal labor recruitment, exploitation, lack of safety, irregular welfare and high mobility. The number of actual foreign workers is much greater than the official estimates. The main countries that these workers come from are: Romania (European citizens), Morocco and Albania.
CHARACTERISTICS OF THE CONSTRUCTION INDUSTRY IN THE REGION OF TUSCANY The economic weight of the construction industry fluctuates around 5% of business volume and similarly, the employment of workers is expected to be around 6%. In 2004 in Tuscany around 54,410 companies were active, with a high concentration in the Province of Florence (around 13,000 companies), followed by the Province of Lucca (7,200 companies) and then Pisa (5,400 companies). The biggest increase seen amongst companies in this sector is in the restoration and maintenance fields (+9.8 %). (Information from Unioncamere) As a matter of fact, the predominant division in the Region of Tuscany is that of restoration and maintenance of already existing buildings due to the existence of a vast legacy of ancient buildings, historic city centers and monumental buildings. This makes up the main component of the market. Interventions of maintenance constitute 66% of the total construction activity. The renovations division is characterized by strong stability both in relation to the overall construction systems and in relation to other sectors in this industry. When characterizing the companies, the framework is very significant from a size point of view: 90% of companies have less than 10 employees (81% between 1 and 5 employees). 66% of employed workers are classified in this category, whereas only 23% of employed workers work for companies that have between 10 and 19 workers (6% of the total companies). The majority of modest sized interventions are carried out by micro artisanal companies, who have less than 9 employees, a market segment that is tied to the financial situation and to the expectations of small private customers. Projects of a larger commitment, in renovation and in new buildings are annuity for more structured companies or companies that see the appeal in combining companies and/or subcontracting. Companies in Tuscan are classified by number of workers as follows: From 1 to 5 workers From 10 to 19 workers From 20 to 49 workers More than 50 workers
91% 6.6% 1.4% 1%
One of the main difficulties of Tuscan companies is creating a big company and getting out of the local market to associate themselves with other partners in order to apply for
contracts for medium to large sized companies. Nonetheless, in the last years, we have seen the arrival of new organizational representatives from integrated contracts, project funding and property developers often identifiable with companies in the same sectors. In the sphere of major works the funding societies are the ones contracting the workers. Environmentally sustainable building along with the return of traditional more wholesome techniques that have a minor impact on the environment have been noted as new fields in growth. Both at normative and legal levels Tuscany is moving toward sustainable construction. Workers- There are around 1,700,000 construction workers, of which around 1,100,000 of these are employed workers (information from 2003), with 18.4% being non EU workers. 80% of hired workers are unqualified. This statistic contrasts with the need for qualified personnel with specific professional techniques in restoration and sustainable building. Therefore, skilled figures will most likely become more necessary both at an operative level (such as scaffold, decorators/painters, machinery operators, system installers, etc.) and as technicians (site managers and technicians).
CHARACTERISTICS OF THE CONSTRUCTION INDUSTRY IN THE PROVINCE OF FLORENCE The characteristics of the construction industry in Florence are similar to the regional ones. Construction makes up 17.4% of the entrepreneurial overview and supplies around 145 million Euros each year. COMPANIES OPERATING IN FLORENCE (last ISTAT census – Province of Florence) 2001 n. 10,006 COMPANIES
+ 27% compared to 1996
n. 28,090 WORKERS
+ 13.6 % compared to 1996
EVALUATION PARAMETERS 1. Company size Variation of the size characteristics based on the type of company (the information refers to the last national census) Type of company
Large construction, civil and industrial engineering works (class 4521 ISTAT) Roofs and shingles (Class 4522 ISTAT) Installations Companies working in restoration Building completion and finishing
Number of companies
Number of workers
– 29.4% + 40.8% + 31.8% + 66.9%
- 16.8% + 45.7% + 35.8% + 70.0%
From this information, we can deduce that the companies working in building completion, installations and restoration are growing numerically, while the number of companies and workers that work in large constructions is dropping. Most of these are small companies: 60% have only one worker 95% have less than 10 workers More than 85% of the structure is made up of individual firms of which 61.3% have only one employee who is the owner (figure of owner â€“ worker); almost two thirds have declared a revenue under 80 million Euros a year. The majority of these are artisan companies characterized as follows: Distribution of artisan construction companies divided by number of workers: Number of workers Percentage 1 worker 61.3% From 2 to 4 workers 33.2% from 5 to 9 workers 4.6% 10 and more workers 0.9%
Distribution of artisan construction companies divided by number of workers 5% 1%
2 to 4 workers 61%
5 to 9 workers 10+ workers
In the companies that have employees, full-time open ended contracts are the most common: - Full-time open ended contracts = 96% - Fixed term contract = 5.6% - Temporary contracts = 1.5% 2. Territorial range of action Another characteristic of construction companies in the Florentine area is a territorial range of action concentrated on a local level. 34% work within the city 60% have outsourcing relationships with companies from the same city
58.3% work as sub contractors with companies from the same province 3. Type of companies based on the corporate designation Artisan construction companies by corporate designation Sole trader 85.7% Commercial Partnership 10.4% Limited Liability company 1.6% Other corporate designations 1.1% Artisan cooperative 1.1% Limited Partnership 0.2% Artisan construction companies by corporate designation
The prevalence of the sole trader results to be notable, a phenomenon that corresponds to the tendency to limit hiring workers and to work by collaborating amongst companies, usually sole traders are outsourced or sub contracted. 4. Clients â€“ outsourcing and sub contracting 88.8% of artisan construction companies work for private citizens and other construction companies while 11.2% work for public bodies. 14.5% have around 6 to 10 clients while only 5.1% have more than 10 commissioners 80.4% outsource for other companies (outsourcing) 53.1% of the companies obtain part of their revenue from jobs for other companies in the same field (subcontracting) 20% have recourse to subcontracting 5. Type of activity 86.7% of Tuscan artisan companies work in residential restoration 6. Investments (information from 2001) 25.6% have increased their spending in investments (compared to the previous year) 37.5% have bought new machinery other than replacements/substitutions
7. Competition The competition in this area comes mostly from companies from outside of Florence that participate in public calls for proposals and competitive offers, whereas there isn’t much competition among local companies. This has been the determining figure in the closure of many historic companies in the area that were unable to adapt themselves to the changes in the market and to an always increasing complexity of the norms and procedures that require specialized technical and administrative figures within the companies. The role of the entrepreneur Characteristics of the entrepreneur •
by age group
52% 24% 24% Average age of entrepreneurs
44 and younger Between 45 and 54 years old 55 and older 45 years old
Middle school diploma Elementary school diploma High school diploma Technical school University degree
50.7% 34.5% 9.4% 4.2% 1.2%
Training There is a high demand for recruitment of trained figures that can complete jobs as skilled and semi-skilled workers, especially in architectural restoration. Currently, there is an abundance of unqualified workers on the market. It is difficult to carry out training for mentoring, given the time and the workmanship demands in an area that is characterized by its small and medium sized companies. Many professionals specialized in traditional workmanship (stone-cutters, stuccoers, wood carpenters, decorators, blacksmiths, etc.) weren’t able to pass on their knowledge to new generations, partly due to the lack of interest of Italian youth in learning old constructions trades. Only 17.2% of companies have workers who have taken professional training courses (both internal and external) of which: 8.6% of these companies have only one worker 46.7% have 10 or more workers