[비즈한국] As the construction industry faces a grueling march due to economic stagnation and rising cost ratios, the number of general construction firms saw a net decrease in the first half of this year for the first time since related statistics began to be compiled. As management difficulties are exacerbated by a decline in construction contract volume and rising cost ratios, the number of closures for general construction firms hit an all-time high, while new registrations reached an all-time low.
According to an analysis of Construction Industry Knowledge Information System data by BizHankook, the number of general construction firm registrations in the first half of this year was 284 (including changes, corrections, and withdrawals), an 11% decrease compared to the previous year. This is the lowest figure since the disclosure of related information began in 2004. The number of registrations for general construction firms, which reached 4,752 in the first half of 2022, has steadily declined to 638 in the first half of 2023, 318 in the first half of 2024, and 284 in the first half of this year.
Conversely, the number of closures hit an all-time high. In the first half of this year, 326 general construction firms filed for business closure, a 12% increase from the previous year. This is also the highest figure since the information began to be disclosed. The number of closures for general construction firms has been on an upward trend, rising from 150 in the first half of 2022 to 248 in the first half of 2023, 292 in the first half of 2024, and 326 in the first half of this year. With closures outnumbering new registrations, the number of general construction firms saw its first net decrease in the first half of this year.
This trend is analyzed to be primarily due to management difficulties stemming from the recent construction slump and rising cost ratios. According to the Ministry of Land, Infrastructure and Transport, the total value of construction contracts in the first quarter of this year was 60.1 trillion won, a 4.8% decrease compared to the same period last year. While the public sector saw a 12% increase to 23.9 trillion won, the private sector led the overall decline with a 13.4% drop to 36.1 trillion won. Due to rising raw material prices and labor costs, the average sales cost ratio for Korea's top 10 construction firms reached 93% last year.
The construction labor market is also failing to escape the doldrums due to the construction slump. According to employment insurance statistics from the Korea Labor Institute, the number of construction industry employment insurance subscribers was 754,000 as of last May, a decrease of 19,000 (2.5%) compared to the same month last year. The decline in subscribers was centered on general construction (-18,600), males (-17,600), and those in their 40s (-14,800). In these statistics, the number of construction industry employment insurance subscribers has been on a downward trend for 23 consecutive months.
In its economic outlook for the first half of the year released last May, the Korea Development Institute (KDI) analyzed, "Construction investment is expected to continue its downward trend this year (-4.2%), following last year (-3.0%), but the slump is expected to ease next year with an increase of about 2.4% as the impact of improved construction orders is gradually reflected." However, they also warned, "Internally, if the financial soundness of construction firms deteriorates due to a decline in the housing market, the recovery of construction investment could be delayed."