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Country fact sheets

Country fact sheets

ECSO profiles the construction industry in the 27 EU countries and the UK, and produces detailed country fact sheets (CFS) for each country (The country fact sheets are updated annually). Each CFS provides an analysis of key figures of the construction sector, macro-economic indicators, economic drivers, issues and barriers, innovation, the national/regional policy and regulatory framework, and the current status and national strategy to meet Construction 2020 objectives.

Austria

Austria

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In 2019, Austria’s GDP amounted to €374.7 billion, exhibiting a 1.6% growth over the previous year. This also represents a 14.7% increase as compared to the 2010 level (€326.7 billion). The growth was mainly driven by a strong domestic demand. However, falls in exports and equipment investment led to a slowdown in the annual GDP growth.

Number of enterprises in the narrow construction sub-sector between 2010 and 2019

+20.4%

Reflecting this macro-economic trend, the number of enterprises in the broad construction sector grew by 15.3% between 2010 and 2019, totalling 77,351. This growth was mainly driven by the increase in the number of enterprises in the narrow construction (+20.4%), real estate activities (+11.8%), architectural and engineering activities (+11.5%) and manufacturing (+3.8%) sub sectors over the same reference period.

Similarly, the volume index of production in the broad construction sector recorded an increase of 22.6% during 2015-2019, mainly driven by a 25.0% increase in the construction of buildings and a 12.0% growth in the construction of civil engineering, over the same period.

Volume index of production in the construction of buildings between 2015 and 2019

+25.0%

Turnover in the architectural and engineering activities sub-sector between 2010 and 2019

+39.3%

Reflecting the increased volume index of production, the turnover in the broad construction sector marked a strong increase between 2010 and 2017 (+23.6%), reaching €87.8 billion. It further increased to €93.6 billion, marking a 31.8% rise since 2010. This overall increase was mainly driven by the turnover growth in the architectural and engineering activities (+39.3%), the narrow construction (+35.3%), the manufacturing (+30.1%), and the real estate activities (+20.1%) sub-sectors over the 2010 2019 period.

Similarly, the gross operating rate of the broad construction sector, which is used to assess the profitability of the sector, stood at 18.2% in 2017, 0.5 percentage points (pps) higher than in 2010 (17.7%). This is above the EU-27 average of 16.6%. Among the sub-sectors, the real estate activities remained the most profitable (44.1%), followed by the architectural and engineering activities sub-sector (19.6%), the manufacturing (10.9%) and the narrow construction (9.9%) sub-sectors in 2017 respectively.

In terms of employment, there were 509,384 persons employed in the Austrian broad construction sector, registering a 17.6% increase over the 2010 level (433,225 persons). This was mainly driven by the growth registered in the number of persons employed in the architectural and engineering activities sub sector (+23.7%), followed by the narrow construction (+20.0%), the real estate activities (+16.3%) and the manufacturing (+2.8%) sub sectors, over the 2010-2019 period.

Nevertheless, Austria lacks high-skilled labour and faces difficulties in attracting young people to work in the construction sector. In fact, the job vacancy rate in the narrow construction sub sector increased from 2.3% in 2010 to 5.7% in 2019. Moreover, unemployment among low skilled workers has doubled in Austria to over 20.0% since 2008.

The demand in the housing market is supported by declining interest rates on mortgage loans; rising households’ income and increasing numbers of households (+9.0% between 2010 and 2019). Moreover, investments in dwelling increased by 34.7% between 2010 and 2018, reaching €17.3 billion. However, the housing supply seems to be lagging behind the demand, which in turn drives up the house price index (+26.6% between 2015 and 2019).

In December 2019, the European Investment Bank (EIB) and Raiffeisenlandesbank Niederösterreich-Wien AG (RLB NÖ-Wien), an Austria-based bank, provided €300 million to finance affordable housing in Austria.

With regards to the investment in non-residential construction and civil engineering, ÖBB Infrastruktur, entered into an agreement in June 2020 to invest €1.1 billion in railway projects across three out of nine Austrian regions, namely Styria, Tirol and Vorarlberg. These investments are part of the broader Transport Plan for Austria (Gesamt verkehrsplan für Österreich), which defines the country's policy and sets the objectives and priorities until 2025. All in all, this is expected to contribute to the creation of market opportunities as well as jobs for the construction sector.

The ongoing COVID-19 pandemic is expected to have a limited impact on the ongoing projects in Austria. Nevertheless, excess demand for housing is expected to support investment in the Austrian construction sector. Investment in infrastructure projects is also likely to be conducive to growth.

Belgium

Belgium

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Over the 2010-2019 period, the Belgian GDP increased by 13.5%, totalling €443.6 billion in 2019. This also represents a 1.5% annual growth in comparison to the 2018 levels.

The Belgian economy performed moderately in 2019, primarily due to weaker domestic demand and fewer net exports, coupled with modest private consumption growth.

Number of enterprises in the real estate activities sub-sector between 2010 and 2019

+31.5%

Correspondingly, the number of enterprises in the broad construction sector increased by 19.3% over the 2010-2019 period, totalling 183,217 in 2019. With regards to sub-sectors, the largest incline was reported by the real estate activities (+31.5%) sub sector, followed by the narrow construction (+17.9%) and the architectural and engineering activities (+11.8%) sub-sectors over the same reference period.

Likewise, the volume index of production in the broad construction sector marginally increased by 2.8% over the 2015-2019 period, mainly driven by a 12.9% increase in the production of construction of civil engineering, partially offsetting a 0.1% increase in the production of construction of buildings in the same timeframe.

Total turnover in the Belgian broad construction sector increased to €111.4 billion in 2017 and further to €139 billion in 2019. This represented an incline of 67.6% since 2010 and was primarily driven by growth in two sub sectors – the narrow construction (+92.6%) and the real estate activities (+47.9%) sub-sectors over the 2010-2019 period.

Turnover in the narrow construction sub sector between 2010 and 2019

+92.6%

Similarly, the gross operating rate of the Belgian broad construction sector, an indicator of the sector’s profitability, stood at 14.6% in 2017, in line with its 2010 level of 14.5% (and lower than the EU 27 average of 16.6%. The real estate activities sub-sector remained the most profitable (40.7%), followed by the architectural and engineering activities (13.8%), narrow construction (10.5%) and manufacturing (10.0%) sub-sectors in 2017.

Employment in the real estate activities sub sector between 2010 and 2019

+35.7%

With regards to employment, there were 509,172 persons employed in the Belgian broad construction sector in 2019, registering an increase of 12.6% since 2010. This was primarily driven by an increase of 35.7%, 13.2% and 12.6% in the real estate activities, narrow construction and the architectural and engineering activities sub sectors respectively, offsetting the 13.4% decline in the manufacturing sub sector between 2010 and 2019.

The Belgian government has launched numerous initiatives to promote and develop the construction sector.

Since 2019, the government approved a new lease to own arrangement in public housing, as well as a new housing and energy bonus scheme. A new 'Housing Emergency Plan' for social housing is also being formulated to provide affordable social housing to 15,000 households.

Additionally, under the Regional Housing Plan and the Habitat Alliance, the government is leading the sustainable renovation of existing housing stock in addition to the construction of 6,400 new housing units.

In relation to infrastructure development, the Belgian government has initiated various projects such as the construction of a regional express network (RER) around Brussels, a second rail access to the port of Antwerp, additional tracks between Ghent and Bruges, as well as Bruges and Zeebrugge. Another noteworthy example is the on going modernisation of the Brussels Luxembourg track. The federal rail investment strategy has been set out in the SNCB/Infrabel's Multiannual Investment Plan 2018-2020, as well as in the Multiannual Strategic Investment Plan 2018-2031, amounting €4.2 billion and €1.2 billion, respectively.

At the regional level, the government of the Brussels-Capital Region has extended the Multiannual Investment Plan for Public Transport until 2028, involving investment of more than €6 billion for the three main transportation modes: metro, tram and bus. The Flanders region is also adopting an integrated investment programme called 'Geïntegreerd Investeringsprogramma' (GIP), involving a total investment of €1.9 billion in mobility and public works.

While these initiatives will contribute to the growth of the broad construction sector, the latter faces two major challenges. Firstly, the construction sector suffers from late payments, which has been worsened due to the outbreak of COVID-19. As a result, according to the European Payment Report 2020, about one-fifth of SME respondents expect late payments to cause a liquidity crunch. Secondly, the on-going shortage of skilled workers, along with a skills mismatch for existing roles, continues to be a major concern for the sector.

Despite the onset of COVID-19 epidemic, the Belgian construction sector has a positive outlook in the medium and long term. After over-coming some short disruptions resulting from the lockdown in 2020, the sector is expected to grow from 2021 onwards. Investments in the construction and infrastructure sector are expected to rise in the coming months driven by increased federal government support for developing new social housing stock while renovating existing building stock.

Bulgaria

Bulgaria

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Since 2010, Bulgaria’s GDP has increased by 25.0%, amounting to BGN 102.3 billion (€52.3 billion) in 2019. This also represents a 3.4% growth compared to the 2018 levels.

Bulgaria’s GDP performed modestly in 2019, driven by strong private consumption, rise in public investment and high capacity utilization. It was also partially driven by a healthy inflation rate as a result of rapid wage growth, high employment rate, strong domestic demand and higher food prices.

Similar to the country’s economy, the Bulgarian broad construction sector has also gained slight momentum. The number of enterprises in the broad construction sector totalled 54,098 firms in 2019 (a marginal decline of 0.5% over 2018). This also represents an increase of 6.7% between 2010 and 2019.

Volume index of production in construction of civil engineering sub-sector between 2015 and 2019

-19.8%

In contrast, the volume index of production in the broad construction sector decreased by 7.5% over the 2015-2019 period, driven by the 19.8% decline in construction of civil engineering during the same period. Conversely, the production in construction of buildings increased by 3.5% in 2019 compared to 2015.

The total turnover in the broad construction sector stood at €10.4 billion in 2017, representing a slight increase of 5.3% compared to 2010 (€9.9 billion). It further increased to €11.9 billion in 2019, a 20.6% increase since 2010. This overall increase was driven by growth in sub-sectors including in the real estate activities (43.6%), the manufacturing (40.1%) and the narrow construction (17.5%) sub-sectors over the 2010-2019 period.

Turnover in the broad construction sector between 2010 and 2019

+92.6%

Similarly, the gross operating surplus of the broad construction sector recorded a moderate increase of 21.5% between 2010 and 2017, reaching €1.7 billion. Majority of this increase was driven by growth in the real estate activities (53.1%), followed by manufacturing (31.5%) and the narrow construction (19.8%) sub-sectors over the same period. Correspondingly, the gross operating rate of the broad construction sector, an indicator of the sector’s profitability, increased from 13.8% in 2010 to 15.9% in 2017. This is slightly below the EU-27 average of 16.6%.

Number of people self-employed in the broad construction sub-sector between 2010 and 2019

-11.1%

In terms of employment, there were 245,195 persons employed in the Bulgarian broad construction sector in 2019, representing a drop of 11.1% over 2010. This was driven by a fall in employment in the architectural and engineering activities (-24.5%), the narrow construction ( 13.4%) and the manufacturing (-12.8%) sub sectors during the same period.

There are several crucial issues hindering the sustainable development of the Bulgarian construction sector. Firstly, the issue of rising number of bankruptcies declared by the broad construction sector companies. The number of company deaths in the narrow construction sub sector and the real estate activities sub-sector grew by 58.5% and 156.0%, from 2,068 and 1,433 in 2010 to 3,420 and 3,669 in 2017, respectively.

Company death in the narrow construction sub-sector between 2010 and 2017

+58.5%

Company death in the real estate sub-sector between 2010 and 2017

+156.0%

Secondly, the issue of late payments by the customers. The outbreak of COVID-19 pandemic has made the situation even more difficult. According to the European Payment Report 2020, 43.0% of the SME respondents expect late payments to have a high impact on liquidity squeeze, just slightly lower than EU average of 45.0%.

Percentage of Bulgarian respondents reporting late payment by B2B customers in Easter Europe

77.0%

Thirdly, the continuing shortage of skilled and professional workforce in the construction sector continues to be a major concern. Fourthly, the business environment remains heavily regulated. The public procurement process continues to be non-transparent and distorted. Several rounds of authorization schemes for construction companies further make the entire process difficult and inconvenient.

Investment in innovation and R&D activities is still limited and lacklustre and can be further improved. Although the business enterprise R&D expenditure (BERD) in the narrow construction sector has increased over the years, much improvement is still needed to deliver on Bulgaria’s innovation commitments. Moreover, the annual number of construction-related patent applications in 2019 continues to be two, same as 2010 levels.

Business enterprise R&D expenditure (BERD) in the narrow construction sector increased by 819.7%, from €0.2 million in 2012 to €1.7 million in 2017.

The Bulgarian economy also faces major challenges in the innovation front due to lower digital skills of its workforce and insufficient investment in the integration of digital technologies into business.

The overall outlook for the broad construction sector is promising in the long run, primarily supported by increased investments in public infrastructure backed by EU funding. The EU-Turkey agreement linking Istanbul to the Bulgarian border crossing via a high-speed train as well as the ongoing national highway motorway construction are favourable developments for the country. Bulgaria continues to prioritize the development of corridors ‘Orient/East-Med’ and ‘Rhine-Danube’ including connections with Western Balkan countries, in order to become a transit country on the future Alpine-West Balkans Rail Freight Corridor.

The outbreak of COVID-19 pandemic has massively impacted the economic landscape of the country. Under the revised 2020 Budget, Bulgaria has extended its budget deficit target to BGN 3.5 billion (€1.8 billion) with an increased public debt ceiling of BGN 10.0 billion (€5.1 billion) for 2020 . Furthermore, EU funding earmarked for education, training, transport infrastructure and the environment has been switched to an ERDF fund, aimed at protecting growth and SMEs, including an ESF fund for access to jobs . Although no construction sector-specific regulation has been adopted for the COVID-19 situation, there are other regulations that indirectly affect the sector.

Despite having better prospects than many other sectors, the Bulgarian broad construction sector will witness difficulties in meeting its set target goals for 2020. Any major improvement is only expected to take place post market recovery from 2021 onwards.

Croatia

Croatia

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In 2019, Croatia’s GDP increased by 3.0% over the previous year, primarily driven by the rise in the labour market, increasing wages and a robust increase in investments.

Between 2010 and 2019, the Croatian GDP experienced an increase of 11.9% amounting to HRK 383.3 billion (€50.7 billion) in 2019.

Number of enterprises in in the architectural and engineering activities sub-sector between 2010 and 2019

+38.2%

The number of enterprises in the broad construction sector decreased by 6.4% over the 2010-2019 period, totalling 36,620 enterprises. The decline was mainly due to the reduction in the number of enterprises in the real estate activities ( 18.9%), the manufacturing (-13.3%) and the narrow construction (-10.4%) sub sectors. In contrast, the number of enterprises in the architectural and engineering activities sub sector increased by 38.2% over the same period.

Similarly, the volume index of production in the broad construction sector recorded an increase of 19.8% during 2015-2019, mainly driven by a 39.2% increment in the construction of buildings, partially offsetting a 1.2% decline in the construction of civil engineering over the same reference period.

Volume index of production in the construction of buildings between 2015 and 2019

+39.2%

Turnover in the real estate activities sub sector between 2010 and 2019

+60.4%

Correspondingly, the total turnover of the broad construction sector slightly declined by 4.6% between 2010 and 2017, reaching €10.0 billion. However, it further increased to €12.6 billion in 2019, representing a 20.4% increase over the 2010 level. This overall increase was mainly driven by the turnover growth in the real estate activities (+60.4%), the manufacturing (+48.2%) and the narrow construction (+15.7%) sub sectors over the 2010 2019 period.

Similarly, the gross operating rate of the broad construction sector, which is used to assess the profitability of the sector, stood at 15.6% in 2017, 1.4 percentage points (pps) higher than in 2010 (14.1%). This is slightly below the EU-27 average of 16.6%. Among the sub-sectors, the real estate activities remained the most profitable (33.0%), followed by the architectural and engineering activities (18.8%), the manufacturing (13.0%) and narrow construction (12.8%) sub-sectors in 2017.

There were 195,578 persons employed in the Croatian broad construction sector, marking a 3.5% decline over the 2010 level (202,674 persons). This was mainly due to the reduction registered over the same period in the narrow construction sub-sector (-7.3%), accounting for more than half (64.7%) of the total workforce in the broad construction sector in 2019. This decline was partly mitigated by the growth of persons employed in the manufacturing (+18.4%), the architectural and engineering activities (+11.0%), and the real estate activities (+6.0%) sub sectors during 2010-2019.

The shortage of professional and skilled workforce in the construction sector continues to be a major concern. In response, the authorities are facilitating the access to the labour market for foreign workers by significantly increasing the number of work permits in several sectors including construction.

The demand for housing in the housing market remained strong over the past few years. In fact, Croatia is facing a surge in real house prices in some areas, with rental prices rising steeply above inflation and GDP growth. These trends have made housing less affordable. To address this issue, the Croatian government adopted the Subsidised Loan Programme to provide affordable housing to its citizens. During the four years of its implementation (2017-2020), more than 13,000 subsidised loans were approved, proving the relevance of such a programme.

With regards to the investment in civil engineering, in March 2020, the EU approved more than €119.0 million from the EU Cohesion Fund to finance infrastructure projects in Croatia. In October 2019, the government also announced its plan to invest €3.5 billion for the modernisation of existing railway infrastructure and the construction of new railway infrastructure by 2030.

The ongoing COVID-19 pandemic is expected to have some impact on the ongoing projects in Croatia. Nevertheless, excess demand for housing is expected to support investment in the Croatian construction sector. Investment in infrastructure projects is also likely to be conducive to the sector’s growth in the midterm.

Cyprus

Cyprus

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In 2019, Cyprus’ GDP reached €21.3 billion, exhibiting a 3.2% increase over the previous year (€20.7 billion).

The growth of the Cypriot economy is driven by a steady rise in household consumption on account of strong employment growth.

Number of enterprises in the real estate activities sub-sector between 2010 and 2019

+66.8%

In parallel, the number of enterprises in the broad construction sector increased by 5.9%, from 13,670 in 2010 to 14,482 in 2019, with the real estate activities sub-sector registering the highest incline of 66.8%, followed by the architectural and engineering activities sub sector (+46.0%) over the 2010 2019 period.

The volume index of production in the broad construction sector experienced a growth of 102.2% over the period of 2015-2019. This was driven by a 130.6% incline in production in the construction of buildings and a 10.9% incline in the production in construction of civil engineering.

Total turnover of the broad construction sector in 2017 reached €3.8 billion, declining by 21.6% since 2010 (€4.8 billion). Further, in 2019 it reached €5.0 billion, marking a 3.9% increase since 2010. This overall increase was driven by the real estate activities and narrow construction sub sectors, which turnover grew by 45.8% and 11.9% respectively, over the 2010 2019 period.

Similarly, the gross operating rate of the broad construction sector , an indicator of the sector’s profitability, stood at 13.5% in 2017, marking a decline of 5.9 percentage points (pp) since 2010. This is below the EU 27 average of 16.6% in 2017. The architectural and engineering activities sub sector was the most profitable sub sector, with a gross operating rate of 41.0% in 2017.

In terms of employment, there were 47,446 persons employed in the broad construction sector, representing a decline of 5.0% in comparison with the 2010 levels (49,952 persons). This was primarily due to a 23.4% decline in the number of persons employed in the manufacturing sub sector, followed by the declines in the narrow construction and architectural and engineering activities sub sectors, by 3.6% and 0.6% respectively, over the 2010 2019 period. However, the number of persons employed in the real estate activities sub sector witnessed a growth of 51.2% over the same period.

Number of persons employed in the real estate activities sub sector between 2010 and 2019

+51.2%

The Cypriot housing market continues to be largely driven by foreign demand, which accounted for almost 50.0% of total property sales since 2014.

The non residential construction and civil engineering market is driven by the EU cohesion policy and its funds, which play a significant role. Cyprus received €917.3 million from European Structural Investment Funds.

Infrastructure and the promotion of public transport and urban mobility have been recognised as priority investment areas by Cyprus’ Europe 2020 National Reform Programme. A total of 50 major infrastructure projects have been included in Cyprus’ 2021 annual budget.

Presently, two main issues hinder the development of the Cypriot construction sector. First, the sector faces a shortage of skilled workers. Around 7.5% of firms in the construction sector reported a labour shortage in 2019, the highest among all sectors. Secondly, the sector faces issues relating to construction and demolition waste (CDW). The lack of treatment facilities for CDW in Cyprus gave rise to illegal dumping grounds in and around the capital city, Nicosia. As a result, in November 2019, a recycling unit for solid construction and demolition waste was inaugurated in Limassol.

The outbreak of the global COVID-19 pandemic has further significantly impacted the Cypriot construction sector. With the imposition of a nationwide lockdown, the construction sites and sales offices remained closed for a prolonged period. Moreover, travel restrictions limited foreign demand for construction related investments, which had been a key driver of the Cypriot property market since 2014. Nonetheless, with a significant number of projects lined up for 2021, the construction sector is expected to recover gradually, especially from 2021 onwards.

Czech Republic

Czech Republic

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Over the 2010-2019 period, Czech Republic’s GDP increased by 22.6%, totalling CZK 5,182.8 billion (€198.2 billion) in 2019. This is an annual growth of 2.4% compared to the 2018 levels.

Czech’s economy performed well in 2019, primarily driven by strong private consumption and steady wage increase, partially offsetting weak exports growth and ongoing geopolitical tensions.

Number of enterprises in the architectural and engineering activities sub-sector between 2010 and 2019

+21.3%

Likewise, the number of enterprises in the broad construction sector increased by 7.8% over the 2010-2019 period, totalling 306,477 in 2019. With regards to sub-sectors, the largest increment being reported by the architectural and engineering activities (+21.3%) sub-sector, followed by the real estate activities (+9.1%) and the narrow construction (+6.4%) sub-sectors over the same reference period, respectively.

In parallel, the volume index of production in the broad construction sector increased by 9.2% over the 2015-2019 period, mainly driven by a 17.6% increase in the production of construction of buildings partially offsetting an 8.4% decline in the production of construction of civil engineering between 2015 and 2019.

Production in the construction of buildings between 2015 and 2019

+17.6%

Turnover in the manufacturing sub sector between 2010 and 2019

+23.4%

The total turnover in the broad construction sector increased to €55.8 billion in 2019, representing an increment of 13.5% since 2010. This overall increase was primarily driven by growth in two sub sectors – the manufacturing (+23.4%) and the real estate activities (+22.8%) sub-sectors over the 2010-2019 period.

Similarly, the gross operating rate of the broad construction sector, an indicator of the sector’s profitability, increased from 12.8% in 2011 to 16.2% in 2017. This is still lower than the EU-27 average of 16.6%. The real estate activities sub-sector remained the most profitable (+40.2%), followed by the architectural and engineering activities (+13.5%), the manufacturing (+13.1%) and the narrow construction (+11.1%) sub-sectors in 2017, respectively.

With regards to employment, there were 608,461 persons employed in the broad construction sector in 2019, representing a drop of 4.1% since 2010. This was primarily due to the fall in employment in the manufacturing (-6.1%) as well as the narrow construction (-7.1%) sub-sectors, offsetting the rise observed in the architectural and engineering activities sub sector (+14.3%) during the same reference period.

Several initiatives launched by the government may affect positively the construction sector, by providing further business opportunities. This includes for instance the upcoming housing policy for the period post 2021. This policy is expected to be presented to the Czech cabinet by the end of 2020 . The government is also drafting an Affordable Housing Act, under the Government Legislative Work Plan for 2020. The Act focuses on supporting social housing with a view to provide housing for people.

The ‘Social Housing Concept of the Czech Republic 2015–2025’ is also being updated by the Ministry of Labour and Social Affairs (MLSA) under the changed title of ‘Affordable Housing Concept of the Czech Republic 2020–2025’.

Moving from the housing to the civil engineering market, the Czech government also approved in 2019 a National Investment Plan for 2020-2050, with an allocation of CZK 8.0 trillion (€315.0 billion) and including 22,000 projects. Almost 77.0% of this allocation is earmarked for transport sector projects.

As per the National Investment Plan 2020-2050, about CZK 782.0 billion (€29.9 billion) has been dedicated to motorway construction, CZK 878.0 billion (€33.6 billion) for railway modernisation and CZK 769.0 billion (€29.4 billion) for construction of high-speed railway lines.

Pilot sections of various high-speed lines have already been selected for an accelerated project preparation regime, including Prague Běchovice – Poříčany, Brno – Vranovice and Přerov – Ostrava, Poříčany – Světlá nad Sázavou, etc. Moreover, as for railway infrastructure, the construction of the ETCS Petrovice u Karviné – Ostrava – Přerov – Břeclav line was recently completed on corridor II in the Kolín section, with trial operations scheduled to begin in 2020.

While these policy initiatives will support the development of the construction sector, the latter faces two major issues. Firstly, the construction sector suffers from late payments, which worsened due to the outbreak of COVID-19. As a result, according to the European Payment Report 2020, 25.0% of the SME respondents expect late payments to have a high impact on liquidity squeeze. Secondly, the continuing shortage of skilled workforce continues to be a major concern for the sector.

Over 47.0% of businesses in the construction sector regarded labour shortages as the main factor limiting their production in Q3-2019.

The COVID-19 pandemic had an important impact on the the Czech construction sector. The latter experienced an 8.2% decline in construction output fell by 8.2% year on year in September 2020. The decline is equally observable in the other branches of industrial production. If this trend continues, the Svaz podnikatelů ve stavebnictví (Union of Entrepreneurs in Construction) expects the output of the construction sector to decline by 10.0% (about CZK 500 billion – €18.9 billion). This would mean coming back to approximatively 2018 levels.

The sector is expected to grow from 2021 onwards. With the unlocking of the economy, stalled construction projects have already gained momentum, amidst the sector gearing up for the upcoming projects announced under the National Investment Plan 2020-2050.

Denmark

Denmark

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The Danish economy recorded a relatively strong growth over the past years, reaching DKK 2.3 trillion (€302.0 billion) in 2019 (+2.4% in comparison to 2018) in terms of Gross Domestic Product (GDP). As a result of overall improvement in the general economy, the Danish broad construction sector also experienced continuous growth.

The total number of enterprises in the broad construction sector grew by 15.0% over the period 2010-2019.

In 2019, the number of enterprises in the broad construction sector stood at 72,741, with the narrow construction sub-sector accounting for 48.0% of the total.

Prior to COVID-19 pandemic, the construction market in Denmark was on his peak, showing high volumes of production, low unemployment and growing investments in residential construction, renovations and public infrastructure.

The volume index of production in the narrow construction sub-sector increased by 16.1% over the period 2015-2019. Similarly, the construction of buildings and civil engineering increased by 16.4% and 13.9% respectively over the same period.

Total turnover in the broad construction sector between 2010 and 2019

+66.7%

The turnover of the broad construction sector touched €68.4 billion in 2017, which represents a growth of 54.2% over the period 2010-2017. It increased further to €73.9 billion in 2019 , 66.7% above the 2010 levels. In 2019, more than half (52.7%) of the total turnover was generated by the narrow construction sub-sector, tailed by the real estate (27.2%), architectural and engineering activities (12.0%) and manufacturing (8.2%) sub sectors.

The gross operating rate of the broad construction sector , which gives an indication of the sector’s profitability, stood at 20.5% in 2017 , 1.7 percentage points (pps) higher than 2010 levels, and higher than the EU 27’s 2017 average of 16.6%.

In 2019, employment in the sector reached to its highest level since 2010. In 2019, the number of persons employed in the broad construction sector stood at 325,209 , 25.9% above the 2010 level. This was mainly driven by the increase in terms of people employed in architectural and engineering activities (+32.1%), followed by the narrow construction (+28.3%), manufacturing (+19.7%) and real estate activities (+17.6%) sub sectors in the period 2010-2019.

The shortage of skilled labour at a broader level has eased recently, and it just remains specific to certain sub-sectors and geographic regions in Denmark. The reported numbers of unsuccessful recruitments are also declining on a broader economy level.

The housing market in Denmark in 2019 characterised by a growing housing prices. A new upcoming system for property taxation, coupled with high residential construction activity and previously introduced macroprudential measures are likely to curb housing price inflation further, regardless of mortgage interest rates being at historical lows . However, in 2019, the overall house price index for dwellings was 17.2% above the 2015 level. Specifically, existing dwellings reported the highest increase (17.3% since 2015). The number of total building permits issued increased from 17,097 in 2010 to 26,313 in 2019. This represented a growth of 53.9% over the period 2010-2019.

House price index for total dwellings between 2015 and 2019

+17.2%

In relation to the civil engineering sector and more especially infrastructures, the Danish government announced its plan of negotiating an agreement on infrastructure investments. The latter will tackle the issue of road congestions, by supporting sustainable public transport and cycling infrastructures . One of the most prominent infrastructure projects, the Fehmarn Belt Tunnel, is planned to start on January 2021. With a €7.4 billion budget partly financed by EU Funds, this project aims at connecting tunnel between Denmark and Germany, with a view to reduce travel time. The Danish construction sector faces other challenges as well. It is characterised by a high level of insolvency, majorly in the small-scale businesses in Denmark.

The payment duration in Denmark has worsened in 2019, in comparison with last year. Moreover, the measures planned to protect SMEs from late payment are missing in Italy. This reflects poor late payment record in the sector.

The ongoing COVID-19 pandemic is expected to have mid-term impact on the Danish construction sector. Apart from company insolvencies, the sector has also seen few construction and infrastructure projects being put on hold as a result of containment measures. However, in the long run, the future of the Danish construction sector appears promising, with government strategies in relation to skills and digitalisation in place. The 2020 Budget Bill has allocated a noticeable rise in public expenditure on primary schools and a broad political agreement on October 2019 reserved DKK 102.0 million (€13.7 million) for initiatives to upskill the low skilled workers.

Estonia

Estonia

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Estonia's GDP amounted to €24.7 billion in 2019, marking a 4.3% growth over the previous year (€23.6 billion).

In 2019, GDP growth was mainly driven by strong domestic demand, with key contributions coming from a recovery in investment and from private consumption. Private consumption was supported by high employment and increased real incomes.

Number of enterprises in the broad construction sector between 2010 and 2019

+62.7%

In line with this, the number of enterprises in the broad construction sector grew by 62.7% between 2010 and 2019, totalling 23,801. This growth was primarily driven by the increase in the number of enterprises in the architectural and engineering activities (+84.6%), the narrow construction (+69.6%), the real estate activities (+55.4%), and the manufacturing (+21.8%) sub-sectors over the same reference period.

Similarly, the volume index of production in the broad construction sector recorded an increase of 47.2% during 2015-2019, mainly driven by a 57.5% increase in the construction of buildings and a 27.3% growth in the construction of civil engineering, over the same reference period.

Volume index of production in the construction of buildings between 2015 and 2019

+57.5%

Turnover in the real estate activities sub sector between 2010 and 2019

+194.5%

Reflecting the increased volume index of production, turnover in the broad construction sector marked a strong increase between 2010 and 2018 (+123.4%), reaching €10.2 billion. It further increased to €11.8 billion in 2019, marking a 158.6% rise since 2010. This overall growth in turnover was driven by significant increases in all the four sub sectors, namely – the real estate activities (+194.5%), the narrow construction (+178.2%), architectural and engineering activities (+115.9%) and manufacturing (+104.4%) sub-sectors between 2010 and 2019.

In parallel, the gross operating rate of the broad construction sector, which is used to assess the profitability of the sector, stood at 12.1% in 2018, 1.9 percentage points (pps) above the rate registered in 2010 (10.2%). The real estate activities sub-sector registered the largest profit margin on sales (34.6%) in 2018, followed by the architectural and engineering activities (20.5%), the manufacturing (7.7%), and the narrow construction (6.5%) sub-sectors.

In terms of employment, there were 97,360 persons employed in the Estonian broad construction sector, registering a 36.6% increase in comparison to the 2010 level (71,298 persons). This was mainly driven by the growth registered in the number of persons employed in the narrow construction sub sector (+41.7%), followed by the real estate activities (+31.3%), the manufacturing (+31.1%), and the architectural and engineering activities (+26.3%), sub sectors, over the 2010-2019 period.

Furthermore, demand for housing has increased in Estonia, mainly in urban areas. Nevertheless, the country does not seem to face housing supply shortages, which ultimately has resulted in containing the upward pressure on house prices. Between 2015 and 2019, the house price index for existing dwellings grew by 22.8%, with moderate growth in household debt.

In order to meet the housing demand and support supply, the Estonian government offers several support schemes through KredEx.

In 2019, KredEx (a government owned foundation providing financial services) awarded home grants to 337 large families raising three or more children. There are 1,192 children growing up in these families altogether. The total sum of the grants allocated in 2019 amounted to more than €3.1 million.

The civil engineering segment is expected to benefit from investments in transport infrastructure, which are required to implement the vision of the ‘National Spatial Plan Estonia 2030+’. Furthermore, the Rail Baltica project plays a strategic role. The Estonian part of this expenditure amounts to €1.3 billion out of a total of €4.8 billion budget. The project is expected to be completed by the second quarter of 2021.

Despite favourable economic and investment environments, the Estonian construction sector’s development is experiencing difficulties. Labour and skills shortages are limiting production and putting a strain on profit margins, as wages are increasing. Moreover, bottleneck vacancies in construction persist, representing a barrier to the sector’s growth. Estonia relies on foreign labour to close the gaps, while in parallel, making efforts to reform its educational system, in particular vocational education training (VET).

The COVID-19 outbreak is expected to have a limited impact on the ongoing projects in Estonia. Nevertheless, excess demand for housing is expected to support investment in the Estonian housing market, while large-scale infrastructure projects like Rail Baltica will further support the growth in the sector.

Finland

Finland

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Over the 2010-2019 period, Finland GDP growth has decelerated, albeit remaining positive. Specifically, in 2019, GDP reached €229.7 billion, representing a growth of 1.0% compared to €227.5 billion in 2018 and a growth of 9.1% compared to €210.6 billion in 2010.

Volume index of production in the construction of buildings between 2015 and 2019

+15.8%

In parallel, the volume index of production in the Finnish broad construction sector increased by 13.4% between 2015 and 2019. This growth was partially driven by a 15.8% increase in the volume index of production in the construction of buildings over the same reference period. In contrast, the volume index of production in the civil engineering projects experienced a 2.8% decline over the 2015 2019 period.

Total turnover of the Finnish broad construction sector reached €58.4 billion in 2017. Further, in 2019 , it grew to €69.4 billion, representing a 63.4% increase since 2010. This was driven by an increase in the turnover of the narrow construction (+74.0%), real estate activities (+64.9%), architectural and engineering activities (+50.8%) and manufacturing (+32.1%) sub sectors over the 2010 2019 period.

Total turnover of the broad construction sector between 2010 and 2019

+63.4%

The gross operating surplus of the broad construction sector reached to €8.4 billion in 2017, representing a growth of 34.2% since 2010. Additionally, the gross operating rate of the broad construction sector, which gives an indication of the sector’s profitability, stood at 14.4% in 2017, slightly lower than 2010 level (14.8%). This may be partly explained by the increase in construction cost and particularly input materials and labour costs, which grew by 8.8 ip and 6.3 ip respectively over the 2010 2017 period.

Number of persons employed in the Finnish broad construction sector between 2010 and 2019

+25.1%

In terms of employment, there were 333,988 persons employed in the broad construction sector in 2019, representing a 25.1% increase since 2010. This was mainly driven by the increase in the number of persons employed in narrow construction (+32.9%), real estate activities (+28.9%) and architectural and engineering activities (+23.6%) sub sectors since 2010. However, the number of persons employed in the manufacturing sub sector decreased by 9.8%.

The number of households in Finland experienced a continuous increase, reaching 2.7 million in 2019, which is 8.0% higher than in 2010. Fuelled by continuously declining mortgage interest rates since 2011 (0.9% in 2019), housing loans to households experienced a continuous growth. These factors contributed to a strong housing demand, which drove the housing index price up (+4.0% between 2015 and 2019), especially regarding the price for new dwellings (+9.1% in the same time period). In addition, household debt in Finland has been increasing and has exceeded the EU-28 average. In order to tackle this issue, in early October 2019, the Ministry of Finance proposed to limit to 60.0% of the loan to value ratio (selling price ratio) applicable to housing companies. In addition, the government also started preliminary work in January 2020 to establish a comprehensive credit registry by 2023

In order to further strengthen transport infrastructure, the Finnish government is currently developing a national transport system. This effort is led by the parliamentary steering group and is expected to materialise in 2021.

Total investment in non-residential construction and civil engineering between 2015 and 2019

+18.3%

The persisting labour shortage in the economy, including in the broad construction sector, impedes development, especially taking into account the ageing construction workforce. This suggests a need for investing in skills and VET programmes. To address this issue, the government plans to increase public investment in skills and education, and other areas (R&D infrastructure) in the next few years.

Furthermore, the global COVID-19 pandemic has added to existing challenges in the Finnish construction sector, with the growth projections for the sector being revised to -4.0% for 2020. In March 2020, around 9.0% of the employers in the construction sector in Finland reported facing a considerable impact on their financial situation, such as worsening in late payments and hindrances in procuring raw materials. Several work sites have been closed, with suspension or cancellation of construction projects, due to emergency measures.

The impact of the pandemic in the Finnish broad construction sector was less important than expected in the first six months of 2020, although overall projections for the year remain weak. However, following the gradual reopening of the economy in the second half of 2020, coupled with several construction and infrastructure projects lined up for the country in 2021, the Finnish construction sector is expected to recover from the current adversity.

France

France

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In 2019, France’s GDP reached €2.3 trillion, exhibiting a 12.1% growth as compared to the 2010 level (€2.1 trillion). This also represents a 1.3% increase over the previous year.

This growth, although positive, decelerated for the second year in 2019, as a result of reduced private consumption.

In parallel, the number of enterprises in the broad construction sector increased by 7.1%, from 698,034 in 2010 to 747,349 in 2019. This growth was largely driven by the real estate activities sub sector, which registered the highest increment of 23.9%, over the 2010 2019 period.

Similarly, the volume index of production in the broad construction sector increased by 2.8% between 2015 and 2019. This was primarily driven by an 11.7% increase in the volume index of production in construction of civil engineering over the 2015 2019 period. Conversely, the volume index of production in the construction of buildings witnessed a 0.4% decrease over the same period.

Turnover in the broad construction sector between 2010 and 2019

+19.2%

Likewise, the turnover of the broad construction sector in 2018 stood at €479.1 billion, representing a 14.1% increment as compared to 2010 (€419.9 billion). This further increased to €500.3 billion in 2019, representing a 19.2% increase over the 2010 2019 period. This overall increase was mainly driven by growth in the narrow construction (+30.5%) and the manufacturing (+26.2%) sub sectors, offsetting the decline in the architectural and engineering activities ( 9.2%), as well as the real estate activities ( 4.1%) sub sectors over the 2010 2019 period.

The gross operating rate in the broad construction sector , an indication of the sector’s profitability, stood at 10.5% in 2018, being 0.9 percentage points (pp) below the 2010 level. This indicates that despite higher turnover, the profit margins are limited. According to the FFB (Fédération Française du Bâtiment), this relates to the increase in construction costs, the increasing competitiveness on price and the productivity loss.

In terms of employment, there were 2,587,140 persons employed in the broad construction sector in 2019, marking a 0.3% decline as compared to the 2010 level (2,594,613). This was mainly due to declines experienced in the real estate activities ( 11.7%), the architectural and engineering activities (-3.0%) and the manufacturing (-1.0%) sub-sectors. These were partly mitigated by the growth in the narrow construction sub sector (+2.1%) over the 2010 2019 period.

The French government has already announced several measures to promote the residential construction market. It is supporting access to housing under its Housing First Plan (Le Logement D’abord) (2018-2022).

In order to promote the housing market, the French government abolished the housing tax on the main residence. It also reformed the financing structure of local authorities.

Under the 2020 budget, housing tax has been entirely removed for 80.0% of French households. With regards to the remaining 20.0%, the country’s wealthiest households, there will be a gradual decrease in this tax rate from 2021, followed by complete cessation of housing tax by 2023.

With regards to the civil engineering sector, in accordance with the Grand Plan d’investissement (GPI) investment plan for the 2018-2023 period, the French government has allocated €57.0 billion for the overall economic development. This includes €9.0 billion for the thermal renovation of buildings, €4.1 billion for infrastructure, renovation and sustainable transportation, as well as €7.0 billion for the development of renewable energies. Additionally, the country is planning to invest €13.7 billion by 2023 to improve its transport and mobility infrastructure.

However, the French construction sector continues to face two major issues. The foremost is the shortage of labour, which has hampered the sector’s recruitment. Around 55.0% of companies have consistently reported the shortage of skills as the main barrier to recruitment in the French construction sector. This has affected a greater share of SMEs than large enterprises in the country. Secondly, the prevalence of late payments in the construction sector has an impact on the liquidity of companies. In 2019, the average of unpaid accounts in the French construction sector stood at 33.0%.

Housing prices in France have been consistently increasing for both existing and new dwellings over the 2015 2019 period, reflecting an increasing demand for housing. In the initial months of 2020, the housing market was affected by the global COVID-19 pandemic, which led to a decline in transactions, demand and prices. In the capital region, a record fall of 80% in transactions was recorded. Though there has been an increase in activity post lockdown, the yearly transaction numbers are still expected to be 25.0% 30.0% lower than previous years. Post lockdown, buyers in the French property market have also reported facing tighter lending conditions, as mortgage approvals have become tougher.

Overall, the French construction sector has a positive outlook in the medium and long term. This positive outlook will partly be influenced by the ability of the sector to renew contracts from 2021 onwards. Investments in infrastructure and the residential sector are also expected to rise with the upcoming projects announced under the Grand Plan d’investissement investment plan 2018 2023.

Germany

Germany

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In 2019, Germany’s GDP reached €3.2 trillion, representing an increase of 0.6% as compared to the previous year.

In 2019, the German economic growth slowed down for the second consecutive year, primarily due to weak export performance and muted manufacturing activity.

Number of enterprises in the narrow construction sub sector between 2010 and 2019

+58.5%

In parallel, the number of enterprises in the broad construction sector increased by 32.0%, from 536,874 in 2010 to 708,688 in 2019. This growth was largely driven by the narrow construction sub sector, which registered the highest increment in the number of enterprises (+58.5%), over the 2010 2019 period.

Similarly, the volume index of production in the broad construction sector increased by 13.1% between 2015 and 2019, primarily driven by a 19.9% and 12.2% increase in the volume index of production in the construction of civil engineering and construction of buildings over the same period, respectively.

Volume index of production in the broad construction sector between 2015 and 2019

+13.1%

Turnover in the architectural and engineering activities sub sector between 2010 and 2019

+90.1%

Likewise, the total turnover of the broad construction sector totalled to €579.7 billion in 2018, registering a 53.6% growth above the 2010 levels (€377.3 billion). It further increased to €600.7 billion in 2019 , representing a growth of 59.2% since 2010. With regards to sub sectors, all registered similar growth – the architectural and engineering activities (+90.1%), the narrow construction (+86.9%), the real estate activities (+24.0%) and the manufacturing (+17.8%); over the same reference period.

At the same time, the gross operating rate of the broad construction sector , an indicator of the sector’s profitability, stood at 21.7% in 2018, being a 0.9 percentage point below the 2010 level (22.6%).

With regards to employment, in 2019, there were 4,336,271 persons employed in the broad construction sector in Germany. This represented a 47.6% rise in the number of persons employed from the 2010 levels (2,938,001 persons). This was largely driven by increase in the number of persons employed in the architectural and engineering activities sub sector (+62.6%), followed by the narrow construction (+59.7%) over the 2010 2019 period. The real estate activities and the manufacturing sub sectors also experienced an increase of 25.4% and 6.2% respectively, over the same period.

The German government has initiated several measures aimed at the development of the country’s housing market. It has allocated €5.0 billion under its housing policies towards the construction of 100,000 rental units in the next four years. The government has also allocated €8.0 billion as housing subsidy, to be used over the 2018-2024 period. In 2020, a new tax incentive law for privately financed new rental apartments has also been introduced along with other relevant measures such as the extension of the rental price brake by five years, re activation of fallow lands for the construction of new rental housing and increased incentives for switching to climate friendly heating systems.

The German housing market registered a significant drop in sales due to economic restrictions and nationwide lockdowns announced to combat the COVID-19 pandemic. Even as per the recent estimates, the German government is unlikely to meet its previously declared ambitious target of delivering 1.5 million new housing units by the end of 2021.

Nonetheless, the resilience of the German housing market amid the pandemic has attracted Chinese investors as a safe haven for investment in 2020. This is expected to create new opportunities for the German construction sector in the coming years.

With regards to civil engineering, the German government has already announced a €86.0 billion investment plan in the national rail infrastructure, as part of the total funding of €269.6 billion under the 2030 Federal Transport Infrastructure Plan. Additionally, from 2021, the German government plans to raise €1.0 billion of federal funding per year to expand local public transport infrastructure. This is expected to increase to €2.0 billion per year by 2025. Furthermore, the government intends to invest an additional €900.0 million, between 2020 and 2023, to expand the cycling infrastructure within the country.

Presently, the German construction sector continues to face challenges on two major issues, with the first being labour shortage. It is considered to be a major roadblock in the sector, in comparison with other business sectors. With the country’s working age population expected to decline in the future, these labour shortage issues are likely to deteriorate further in the coming years. In order to tackle this, the German government has implemented Skilled workers strategy (Fachkräftestrategie), which fosters skilled labour immigration from third world countries. Moreover, the Skilled Labour Immigration Act, effective from 1st March 2020, also facilitates in non-EU immigration.

The second issue hindering the German construction sector is late payments. For instance, in 2019, the construction sector took the longest time to pay their customers as compared with other sectors. The average payment duration in the construction sector reached up to 35 days from the date of invoicing, in contrast to the 19-26 day period prevalent in other sectors.

Overall, the German construction sector has a positive outlook in the medium- and long-term. The construction sector has remained resilient throughout the pandemic. Going forward, residential and public sector construction is expected to be the primary growth driver.

Greece

Greece

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The Greek economy has been growing in past few years, with the 2019 GDP reaching €186.5 billion, representing an annual increase of 1.9%. However, it still lies 14.0% below the 2010 levels.

Likewise, the Greek construction sector – though showing clear signs of recovery, has still a long way to go to return to its pre-financial crisis levels.

Number of enterprises in the real estate activity sub-sector between 2010 and 2019

+50.5%

The number of firms broadly in the construction sector reached 158,305 in 2019, representing a decline of 11.2% from 2010 levels. This decline was primarily driven by the manufacturing sub-sector ( 45.3%), followed by the narrow construction sub sector (26.2%). In contrast, the real estate activities and architectural and engineering activity sub-sector s reported a 50.5% and 21.3% increase in the number of firms respectively.

Similarly, the volume index of production in construction has decreased by 29.9% over the period 2015-2019. This was mainly due to 34.0% and 27.3% declines recorded in construction of buildings and construction of civil engineering respectively, over the same period.

As a result, the total turnover in the broad construction sector declined by 27.6% between 2010 and 2017, reaching €16.6 billion. This decline was driven by a 39.7%, 28.3% and 37.8% decrease in the manufacturing, narrow construction and architectural and engineering activities sub sectors respectively. However, the total turnover increased since 2017 reaching €20.3 billion in 2019, representing an overall decline of 11.6% over the period 2010-2019.

Similarly, the gross operating surplus of the broad construction sector recorded a decline of 53.6% over the period 2010-2017, reaching €2.5 billion . This decline was primarily driven by a decrease in the manufacturing (-of 77.3%), narrow construction ( 57.3%) and architectural and engineering activities ( 55.1%) sub-sectors. Correspondingly, the gross operating rate, an indicator of the sector’s profitability, stood at 14.9% in 2017 , representing a decrease from 2011 levels (20.7%).

The number of persons employed in the broad construction sector stood at 280,280 in 2019, representing a decline of 25.8% since 2010. This decline was influenced by a decrease in the numbers in the manufacturing and narrow construction sub-sectors ( 41.6% and 38.9% respectively over the period 2010-2019). Conversely, the number of persons employed in the real estate activities and architectural and engineering activity sub-sector s increased by 46.0% and 26.7% respectively.

Number of persons employed in the narrow construction sub-sector between 2010 and 2019

+38.9%

There are several crucial issues hindering the sustainable development of the Greek construction sector. One of the most important are late payments and long credit periods, which puts pressure on the liquidity of the sector. In 2019 around 16.1% of Greek construction companies recorded late payments (over 90 days). This is reported to be the highest in the Greek economy. The broad construction sector also recorded the least share of companies (35.0%) paying their obligations to creditors by the due date.

Secondly, the shortage of skilled labour in the broad construction sector continues to be a major concern, with limited investment in education, skills and employability. In addition, Greece also has a scarcity of basic digital skills, which is partially explained by the emigration of the [primarily young] workforce. This has resulted in an additional increase of a skills shortage in the economy.

In 2019, the Greek housing market witnessed a strong growth as the house prices in urban areas grew by 9.3%. The Greek government allowed non-EU investors to buy or rent property valued over €250,000. Moreover, it also announced the reduction of the single property tax (ENFIA) and suspension of three-year VAT payments on new building permits. These measures indicate the government’s objective to support the housing market and construction activity in Greece.

The investment in non-residential construction and civil engineering, increased by 2.8% over the period 2015-2019. This slight increase can be partially explained by the increase in building permits for non-residential buildings by 27.0% over the same period.

Presently, infrastructure projects are increasing in Greece, with around €7.4 billion invested in rail projects and €4.3 billion in highway projects. The country is also planning to solidify its status as a transportation hub. It is aiming to privatise its regional ports, backed by EU funding. Major renovations and overhauls are being undertaken on the Greek network of highways, railroads, and air and sea ports.

Meanwhile, the global outbreak of the COVID-19 pandemic has additionally impacted the Greek construction sector. According to PEDEMEDE, though construction activity did not stop, the sector experienced some negative impacts, including: i) contract delays due to Covid-19 (force majeure); ii) increased execution costs due to the strict OSH measures and the costs of restarting and reorganising the construction sites (worksite safety measures, material safety, performance loss due to the new working conditions, additional mobilisation of workers and materials, raw material or products costs’ variations, etc.).

In addition, the property prices have decreased consecutively in the first six months of 2020. Similarly, the foreign demand which was driving the recovery of the housing market has declined significantly and upcoming deals in the housing market have been either postponed or cancelled. However, owing to the gradual reopening of the economy and the re-initiation of government measures related to housing and infrastructure, the construction sector is expected to recover from the short-term turbulence in the near future.

Hungary

Hungary

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In 2019, Hungary’s GDP reached HUF 40.9 trillion (€114.5 billion), exhibiting a 4.9% growth as compared to the 2018 level.

Hungary’s GDP performed well in 2019, mainly driven by supportive macroeconomic policies and domestic tailwinds including booming construction investment .

Number of enterprises in the broad construction sector between 2010 and 2019

+36.2%

The number of enterprises in the broad construction sector in Hungary increased by 36.2%, from 129,409 in 2010 to 176,255 in 2019 . This increase was primarily driven by growth in the number of enterprises in the architectural and engineering activities sub-sector (+52.0%) and the narrow construction (+48.2%).

Similarly, the volume index of production in the broad construction sector grew by 53.9% over the 2015 2019 period. This was primarily driven by the growth in the volume index of production in the construction of buildings (+67.9%) and construction of civil engineering (+43.7%) over the same reference period.

Correspondingly, the total turnover of the broad construction sector reached €34.3 billion in 2018, representing a growth of 49.1% as compared to its 2010 level (€23.0 billion). It further increased to €42.2 billion in 2019 , which represented a growth of 83.6% since 2010. This was mainly driven by the narrow construction (+114.4%), the architectural and engineering activities (+91.2%), the manufacturing (+54.1%), and the real estate activities (+25.2%) sub sectors over the 2010 2019 period, respectively.

Turnover in the narrow construction sub sector between 2010 and 2019

+114.4%

Likewise, the total gross operating rate of the broad construction sector, which gives an indication of the sector’s profitability, stood at 18.5% in 2018 , a 6.1 percentage points (pp) increase from 2010 (12.4%). This is also above the EU-27 average of 16.6%.

In terms of employment, there were 507,607 persons employed in the broad construction sector in 2019, representing 36.2% increase from 2010 level (372,684). This was driven by a growth in all the sub sectors: the architectural and engineering activities (+56.0%), the narrow construction (+45.8%), the real estate activities (+14.4%) and the manufacturing (+9.0%) sub sectors, respectively.

The housing market has witnessed continuous price increases since 2015. In fact, the house price index increased by 70.1% between 2015 and 2019. This was mostly driven by rising disposable incomes and low interest rates, backed by expansion of the government’s homebuying subsidies. However, residential construction had been comparatively slower than the rising housing demand, predominantly due to capacity constraints. This in turn helps explain the housing price increase.

The Hungarian government continues to prioritise investments in infrastructure, as a means to foster economic growth. Supported by EU funds (the European Regional Development Fund – ERDF and the Cohesion Fund), the government modernised 454.0 km of roads, both at the regional level and in connection with the TEN-T network by 2019. Apart from European Union (EU) funding, Hungary's inclusion on China's Belt and Road Initiative has also played an important role in the expansion and development of its transport infrastructure.

In April 2019, the Hungarian government announced its plans to invest €11.0 billion in the road network over the next five years, primarily focusing on the expansion of the Hungarian motorway network.

Despite these developments, the Hungarian construction sector faces some major hindrances. The most important relates to labour and skill shortages, which have been aggravated by policies undermining migrants to enter and work in the country. In 2019, the Hungarian broad construction sector reported requirement of around 40,000 to 50,000 additional workers. Moreover, the lower proportion of education attainment, adult participation in learning and a high proportion of early leavers from education and training, further impedes the issue of skill shortages in the sector.

The onset of the global pandemic COVID 19 also impacted the Hungarian construction sector. For instance, the issue of late payments aggravated, to the point where 64.0% of the Hungarian companies (including construction sector) considered the risk of a pan-European recession as serious. In addition, due to the travel bans, the immigration of foreign workers in Hungary also ceased, worsening the issue of skills and labour shortages.

However, while the sector may face impediments in the short-term (e.g. anticipated drops in housing prices by 9.0 10.0% in the capital city), the upcoming infrastructural projects backed by EU funding, such as the investment of HUF 1.2 trillion (€3.6 billion) in railways by 2022, etc. paves the way for an optimistic outlook for the sector in the long run.

Ireland

Ireland

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In 2019, Ireland’s GDP amounted to €336.5 billion, exhibiting a 5.5% growth over the previous year. The growth was mainly driven by a robust domestic demand and investment in construction.

Number of enterprises in the narrow construction sub-sector between 2010 and 2019

+115.8%

Reflecting this macro-economic trend, the number of enterprises in the Irish broad construction sector considerably increased by 100.2% between 2010 and 2019, totalling 147,932. This growth was mainly driven by the increase in the number of enterprises in the narrow construction (+115.8%), the real estate activities (+70.0%), the manufacturing (+59.8%) and the architectural and engineering activities (+50.5%) sub sectors over the same reference period.

In parallel, the volume index of production in the broad construction sector recorded an increase of 59.5% during 2015-2019, mainly driven by a 65.8% increase in the construction of buildings and a 30.7% growth in the construction of civil engineering, over the same period.

Volume index of production in the construction of buildings between 2015 and 2019

+65.8%

Turnover in the narrow construction sub-sector between 2010 and 2019

+63.2%

Similarly, turnover in the broad construction sector grew by 36.1% between 2010 and 2017, reaching €36.9 billion. It further increased to €77.5 billion in 2019, marking a 186.1% acceleration since 2010. This overall increase was mainly driven by the turnover growth in the narrow construction (+241.4%), the manufacturing (+180.2%), the architectural and engineering activities (+92.3%), and the real estate activities (+21.0%) sub-sectors over the 2010-2019 period.

Moreover, the gross operating rate of the broad construction sector, which is used to assess the profitability of the sector, stood at 14.2% in 2017, as compared to the 2010 level of -12.0%. This is below the EU-27 average of 16.6%. Among the sub-sectors, the real estate activities sub-sector remained the most profitable (27.8%) in 2017, followed by the manufacturing (15.9%), the narrow construction (13.0%), and the architectural and engineering activities (10.5%) sub-sectors respectively.

Number of persons employed in the narrow construction sub-sector between 2010 and 2019

+169.4%

In terms of employment, there were 378,599 persons employed in the Irish broad construction sector in 2019, registering a 142.5% increase over the 2010 level (156,119 persons). This was mainly driven by the growth registered in the number of persons employed in the narrow construction (+169.4%), the real estate activities (+94.0%), the manufacturing (+87.3%) and the architectural and engineering activities (+83.1%) sub sectors, over the 2010-2019 period.

The Irish construction sector suffers from a shortage of skilled labour, requiring an additional 40,000 to 50,000 new construction workers until 2027. This will be a key challenge to address, to ensure the growth of the construction sector. To address this issue, the government has launched several initiatives including the National Skills Strategy 2025 and Action Plan for Jobs, which aims at improving and expanding workers’ skills, including digital skills.

Housing is still a pressing issue in Ireland, given increasing homelessness due to shortages of social housing. The government has taken a range of measures to support housing supply, including the construction of social housing.

As part of Project Ireland 2040, €7.5 billion has been allocated for the 2022-2027 period in the National Development Programme (NDP).

The NDP notably aims at investing €11.6 billion over the 2018-2027 period to facilitate the delivery of 112,000 additional social housing homes. The government has also launched the Rebuilding Ireland Action Plan, aiming to deliver 47,000 new social homes by the end of 2021. This would amount to an average of 25,000 new dwellings per year. Moreover, the 2020 budget announced the extension of the Help-to-Buy (HTB) scheme to 2021. This scheme offers the first-time buyers (FTBs) a refund of 5.0% of the property value under certain conditions. Hence, the prospect of the housing market remains positive.

In addition to the housing market, the civil engineering market is expected to drive part of the development in the Irish construction sector. More specifically, the government is expected to support the development of public infrastructure such as roads, schools, rail, hospitals, housing and other vital societal construction. A total investment of €116.0 billion has been planned for public infrastructure and capital works, under the Ireland NDP 2018-2027, as part of the Project Ireland 2040. Furthermore, as part of the Strategic Investment Priorities over the period 2018-2027, a total of €6.6 billion is planned to be invested to build national routes until 2027.

The Irish construction sector was the only one in the European Union to shut down completely during second quarter (Q2) of 2020 amid the COVID-19 pandemic. The sector is expected to face some challenges including finance raising, skills shortages and project delays due to strict measures like social distancing and lockdown . According to recent reports, projects worth €17.9 billion have been halted in Ireland due to the shutdown .

Italy

Italy

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The economic activity in Italy has been weakening, despite improvement in the labour market. Reflecting this trend, the yearly GDP growth has been gradually decreasing from 1.3% in 2016 to 0.3% in 2019.

However, the broad construction sector has demonstrated in the past few years (and more especially since 2017) some positive development.

Volume index of production in narrow construction sub-sector between 2015 and 2019

+3.6%

In 2019, the volume index of production in the narrow construction sub sector increased by 3.6% between 2015 and 2019, and by 2.0 index points (ip) between 2018 and 2019. This increase follows a growth in investments particularly targeting dwellings (+7.5%) in urban areas, non-residential construction and civil engineering (+6.6%) and the narrow construction sub sectors (+7.1%) between 2015 and 2019, which translated in an annual growth of 2.8 ip, 3.3 ip and 2.1 ip respectively.

However, these positive indicators did not necessarily translate in growth in turnover or profitability. The total turnover of the broad construction sector amounted to €260.3 billion in 2019, which marked a 0.8% and 20.5% decline from 2018 and 2010 respectively. The profitability or total gross operating of the broad construction sector in 2017 decreased by 0.6% from 2016 reaching €18.4 billion. This shows that the sector’s margins are increasingly narrowing.

Turnover of the broad construction sector between 2010 and 2019

-20.5%

As a result, the number of enterprises also declined in 2019 by 3.1% and 14.8% compared to 2018 and 2010 respectively. This trend was partly influenced by the insolvencies of some major players. While the profitability margin is one of the key factors behind these insolvencies, the prominence of late payment also constrained the liquidity of the sector, making it less resilient in times of decline.

Number of persons employed in the broad construction sector between 2010 and 2019

-25.9%

The number of persons employed in the broad construction sector also declined in 2019 by 1.6% and 25.9% in comparison to 2018 and 2010, respectively.

While investments in residential building have been increasing in 2019, with a growing demand for dwellings in urban areas, the house price index decreased by 1.4% between 2015 and 2019. This decrease is expected to continue in 2020, partly driven by the impact of the outbreak COVID-19 pandemic. Since the onset of the pandemic, there has been a sharp decline in prices and sales of dwellings, as a result of either cancellation or postponement of purchases by prospective buyers.

In parallel, the infrastructure and commercial buildings have experienced growth in 2019. In particular, EU funds play a key role in supporting infrastructure development in Italy. This includes, for instance, a €125.0 million grant from EIB in July 2019, which specifically aims at supporting the construction and refurbishment of public infrastructures in the territory of the Region of Friuli-Venezia-Giulia. Yet again, the COVID-19 situation is expected to have a major impact on these projects, causing uncertainty about state investment, political support for future projects as well as potential delays in public spending.

Mirroring the expected GDP decline of 9.5% in 2020, the total value added in the broad construction sector is expected to decrease by 18.1% year over year (YoY) in 2020. This decline will be reflected in all segments – from the housing to the commercial building and public infrastructure. However, the perspectives for 2021 are more positive with the start of an expected economic recovery.

Latvia

Latvia

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In 2019, Latvia’s GDP amounted to EUR 27.5 billion, exhibiting a 2.2% growth over the previous year. This is lower than the growth experienced in 2018 (4.3%), which is explained by a slowdown in investment and a fall in exports led by a deteriorating external environment.

Number of enterprises in the narrow construction sub-sector between 2015 and 2019

+90.7%

The number of enterprises in the Latvian broad construction sector increased by 43.2% between 2010 and 2019, totalling 30,740. This growth was mainly driven by the increase in the number of enterprises in the narrow construction (+90.7%), the architectural and engineering activities (+85.2%), the manufacturing (+42.8%), and the real estate activities (+11.0%) sub sectors over the same reference period.

In parallel, the volume index of production in the broad construction sector recorded an increase of 24.1% during 2015-2019, mainly driven by a 47.2% increase in the construction of buildings and an 8.8% growth in the construction of civil engineering, over the same period.

Volume index of production in the construction of buildings between 2015 and 2019

+47.2%

Total turnover of the manufacturing sub sector between 2010 and 2019

+131.9%

Similarly, the turnover of the broad construction sector grew by 54.4% between 2010 and 2017, reaching EUR 7.3 billion. It further increased to EUR 9.3 billion in 2019, marking a 95.9% acceleration since 2010. This overall increase was mainly driven by the turnover growth in the manufacturing (+131.9%), narrow construction (+104.3%), the architectural and engineering activities (+60.1%), and the real estate activities (+46.6%) sub-sectors over the 2010 2019 period.

In parallel, the gross operating rate of the broad construction sector, which is used to assess the profitability of the sector, stood at 14.5% in 2017, 0.5 percentage points (pps) below the rate registered in 2010 (15.0%). The real estate activities sub-sector registered the largest profit margin in sales (31.2%) in 2017, followed by the manufacturing (15.3%), the architectural and engineering activities (14.7%), and the narrow construction (7.9%) sub-sectors.

Number of persons employed in the narrow construction sub-sector between 2010 and 2019

+59.0%

In terms of employment, there were 145,405 persons employed in the Latvian broad construction sector, registering a 38.6% increase in comparison to the 2010 level (104,894 persons). This was mainly driven by the growth registered in the number of persons employed in the narrow construction sub sector (+59.0%), followed by the architectural and engineering activities (+48.2%) and the manufacturing (+46.9%) sub sectors, over the 2010-2019 period.

Skills shortage and mismatch are the main obstacles to the sustainable growth of the Latvian construction sector. In fact, low-skilled workers are in lower demand and face higher unemployment. The country has adopted a construction industry development strategy for 2017-2024 to address various industry issues, such as, ensuring a qualified workforce, increasing productivity, and improving the quality of construction services. Moreover, the government has introduced preferential conditions to attract highly qualified specialists from abroad in the identified professions.

The housing market is relatively dynamic. The demand for housing has risen following the introduction of the Housing Guarantee Programme, which provides guarantees on mortgages to support the purchase and/or construction and renovation of a first home. The programme also enables families and young professionals to obtain a mortgage against lower down payment than banks would normally require.

In June 2020, the Latvian government amended the state support program for the purchase of housing, by providing EUR 3.5 million to support large families for the purchase of housing.

In terms of the civil engineering market, it is important to note that investment is projected to slow down as inflows of EU funds reached their peak in 2020. Nevertheless, the construction related to the Rail Baltica project, which started in November 2020, is expected to boost investment in 2021.

The outlook for the Latvian construction sector is positive in the short to medium term. Moreover, the ruling coalition’s decision on the allocation of EUR 75.0 million for road infrastructure projects is expected to contribute to the growth of the construction sector.

Lithuania

Lithuania

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In 2019, Lithuanian GDP increased by 3.9% over the previous year and by 38.6% since 2010. This growth is mostly due to high domestic demand and rising public expenditure, as well as stronger exports.

Number of enterprises in the narrow construction sub-sector between 2010 and 2019

+209.2%

The number of enterprises in the broad construction sector increased by 172.8% over the 2010 2019 period, totalling 66,885. This was mainly due to growth in the number of enterprises in the narrow construction (+209.2%), the real estate activities (+196.7%), the architectural and engineering activities (+106.0%) and manufacturing (+30.3%) sub sectors over the same period.

Similarly, the volume index of production in the broad construction sector recorded an increase of 21.8% during 2015-2019, mainly driven by a 23.9% increment in the construction of buildings, and a 19.4% growth in the construction of civil engineering.

Correspondingly, total turnover of the broad construction sector increased by 119.2% between 2010 and 2018, reaching EUR 10.2 billion. It further increased to EUR 10.8 billion in 2019, representing a 133.4% rise above the 2010 level. This positive development was mainly driven by turnover growth in the real estate activities (+143.6%), the narrow construction (+137.1%), the manufacturing (+127.0%) and the architectural and engineering activities (+71.5%) sub sectors over the 2010 2019 period.

Turnover in the real estate activities sub sector between 2010 and 2019

+143.6%

Similarly, the gross operating rate in the broad construction sector, used to determine the sector’s profitability, stood at 16.3% in 2018, 5.9 percentage points (pps) higher than the 2010 level (10.4%). As for the individual sub-sectors in 2018, the real estate activities sub sector remained the most profitable (with a 46.1% gross operating rate), followed by the architectural and engineering activities (16.2%), the narrow construction (8.8%) and the manufacturing (8.7%) sub sectors.

In 2019, there were 190,027 persons employed in the Lithuanian broad construction sector, marking a 45.7% growth from the 2010 level (130,379 persons). This was driven by growth in the real estate activities sub sector (+69.0%) over the same period. The narrow construction sub sector came next with an increase of 47.6%, followed by the manufacturing (+30.3%) and architectural and engineering activities (+22.7%) sub sectors over the 2010 2019 period.

Despite these positive developments, the shortage of skilled workers in the Lithuanian construction sector continues to be a major concern. This is mainly due to emigration and an ageing workforce . To tackle the issue, the authorities are currently planning to simplify the entry procedures for cross border construction workers, and other employees in the industrial and construction sectors.

With regards to market developments, the Lithuanian housing market is an important pillar for the broad construction sector. Household incomes grew at a faster rate than property prices, thus improving the affordability of housing in the country. As a result, property sales also increased by 7.0% from the previous year. This increasing trend continued in the first two months of 2020.

In parallel, in 2019, Lithuania’s non residential construction and civil engineering activities remained at a level similar to 2018’s. The focus of civil engineering activities is placed on the upgrade of road and rail connectivity. With regards to rail connectivity, the country prioritised the development of the Rail Baltica project, due for completion by 2025. As for road connectivity, the Via Baltica road transport project also continued being implemented. In fact, part of the upgrade of the north south road connection was completed in 2019. Investments from EU funds also supported the improvement of 493.0 kilometres of roads in Lithuania, in connection with the Trans European Transport Network (TEN T).

The ongoing global COVID-19 pandemic has impacted the Lithuanian construction sector significantly. Specifically, the housing market faced major blows as sales and consumer confidence plummeted from March 2020. This follows a decrease in domestic and foreign housing demand. In addition, the Lithuanian construction sector suffered from a greater labour shortage following the imposition of travel bans as a COVID-19 containment measure.

However, a robust domestic demand for housing in the third quarter of 2020, following the relaxation of restrictions, is expected to compensate some of the losses experienced during the nationwide lockdown. The market is therefore expected to improve, driven by strong domestic demand. Moreover, the infrastructure projects lined up for 2021, some of which supported by EU Cohesion Policy funds, will also support the recovery of the sector in the mid and long-term.

Luxembourg

Luxembourg

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Over the 2010-2019 period, Luxembourg GDP increased by 29.4%, from €45.2 billion in 2010 to €58.5 billion in 2019, primarily driven by strong domestic demand and active job creation.

Additionally, the application of an automatic wage indexation mechanism (since January 2020), together with a lower inflation rate and sustained private consumption, enabled the country’s economy to perform well amid weak.

Number of enterprises in the real estate activities sub-sector between 2010 and 2019

+23.5%

Reflecting this broader trend, the number of enterprises in the broad construction sector increased by 20.8% over the 2010-2019 period, totalling 8,755 in 2019. With regards to sub-sectors, the largest increment was reported by the real estate activities (+23.5%) sub-sector, followed by the narrow construction (+19.8%) and the architectural and engineering activities (+19.4%) sub-sectors over the same reference period, respectively.

In parallel, the volume index of production in the broad construction sector increased by 9.9% over the 2015-2019 period.

The total turnover in the broad construction sector increased to €11.4 billion in 2019, representing an increment of 48.3% since 2010. This overall increase was driven by three sub sectors, namely the narrow construction (+52.2%), the real estate activities (+46.9%) and the architectural and engineering activities (+41.8%) sub-sectors over the 2010-2019 period.

Turnover of the narrow construction sub sector between 2010 and 2019

-52.2%

Similarly, the gross operating rate of the broad construction sector, which is an indicator of the sector’s profitability, marginally increased from 15.1% in 2010 to 15.2% in 2017. This is still lower than the EU-27 average of 16.6%. With regards to sub-sectors, the real estate activities sub-sector remained the most profitable (48.8%), followed by the architectural and engineering activities (10.4%), the narrow construction (9.3%) and the manufacturing (4.4%) sub-sectors in 2017, respectively.

Number of persons employed in the real estate activities sub-sector between 2010 and 2019

+33.0%

In relation to employment, there were 60,253 persons employed in the broad construction sector in 2019, representing an increase of 18.5% since 2010. This was primarily driven by the real estate activities (+33.0%), the architectural and engineering activities (+28.4) and the narrow construction (+17.6%) sub-sectors over the 2010 2019 period.

The Luxembourgish government has initiated various schemes to develop and promote the housing market. Under its 2018-2023 programme plans, the government plans to completely overhaul the existing housing assistance law and subsidies system to boost the supply of low-cost rental housing. It is also in the process of developing a new 2.0 'State Municipalities' Housing Pact to provide better support to municipalities implementing a housing development strategy. Municipalities involved in the creation of low-cost housing will be assisted through additional financial incentives. Moreover, any capital gains and profits on land sales will be exempt from income tax to further promote the housing market supply side.

With regards to infrastructures, the Luxembourgish government has announced investments of up to €2.2 billion in its rail network over the 2018-2023 period. Additional investments amounting to €390.0 million have also been planned for the tram system over the same reference period. Furthermore, CFL, the state-owned railway network operator in Luxembourg, has announced investment of up to €4.0 billion in the development of rail infrastructure over the 2018-2028 period.

In spite of several policy initiatives supporting the development of the construction sector, the latter continues to face two major issues. Firstly, the construction sector suffers from insufficient housing supply and inadequate transport infrastructures. Investment in dwellings has remained constrained primarily due to the lack of available land, as well as the absence of sufficient incentives for landowners to build. Secondly, the ongoing skills gap in the existing workforce and the shortage of skilled workers continues to be a major concern for the sector.

Despite the onset of the COVID-19 pandemic, the Luxembourg construction sector has a positive outlook in the medium and long term. Existing construction projects have also resumed activities and the sector is forecasted to see major improvements following the economic recovery, which is expected to be felt from 2021 onwards.

Malta

Malta

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In 2019, Malta’s gross domestic product (GDP) reached €12.2 billion, exhibiting a 4.4% growth from previous year (€11.6 billion).

Malta’s GDP performed well in 2019, mainly driven by a substantial rise in gross value added in the services sector coupled with strong investment growth.

Volume index of production in the broad construction sector between 2015 and 2019

+44.9%

The volume index of production in the broad construction sector witnessed an increment of 44.9% over the 2015-2019 period.

At the same time, the total turnover of the Maltese broad construction sector in 2017 stood at €1.8 billion, representing a growth of 81.2% as compared to 2011. Further, the turnover of the broad construction sector increased to €2.2 billion in 2018, exhibiting a growth of 121.9% from 2011. This was partly driven by an 138.4% increase in turnover in the manufacturing sub sector over the 2010 2018 period.

Total turnover in the broad construction sub sector between 2011 and 2018

+121.9%

The gross operating surplus in the broad construction sector reached €635.6 million in 2017 , representing a 160.1% increment as compared to 2011 . Likewise, the gross operating rate of the broad construction sector, which is an indicator of the sector’s profitability, stood at 34.6% in 2017. Additionally, the construction cost index rose by 12.4 index points (ip) between 2010 and 2017, mainly due to an increase in labour costs index by 15.7 ip and increase in index of input prices for materials by 11.4 ip. The construction cost index further increased by 2.3 ip in 2019, from 2017 level. This was also driven by 3.5 ip increase in labour costs index and 1.9 ip increase in index of input prices for materials over the same period.

In terms of employment, 18,521 persons were employed in the broad construction sector in 2018 , marking 55.9% increment as compared to 2011 (11,880 persons). This was mainly driven by a 128.7% increase in the number of persons employed in the real estate activities sub sector.

Presently, there are three main issues hampering the development of the Maltese construction sector. Firstly, the construction sector is hindered by the shortage of skilled workers. This is partly explained by the high proportion of low skilled adults and ageing population. To cope with this issue, the Maltese construction sector tend to rely on foreign workers to fill labour shortages. In fact, the country’s dependence on migrant workers has also increased. In 2019, around 30.0% of the total construction workers were migrants.

Secondly, the lack of legal dumping solutions for construction and demolition waste in Malta is a major roadblock for the construction sector. In October 2019, around 400 excavation and demolition contractors were unable to find legal dumping solutions. The construction sector thus had reached a standstill and Malta Development Association (MDA) appealed to the government to take immediate actions.

Lastly, the persisting issue of late payments has had an unfavourable impact on the construction sector. This issue has been further exacerbated by the global pandemic COVID 19. With respect to the construction sector, around 45.0% of enterprises reported that customers are opting for a longer payment cycle, which negatively impacted their cash flows during the current crisis.

As an impact of the COVID 19 pandemic, around 60.0% of Maltese enterprises in construction sector reported that the amount due was not collected.

The Maltese construction sector has been impacted by the COVID 19 pandemic in several other ways. The construction sites have been reportedly shut down due to lack of materials. Several contracts in the construction sector have either been suspended for a prolonged period or terminated. Moreover, workers at construction sites have also been reported of getting diagnosed with COVID 19.

The construction sector in Malta is expected to rely on the development of the housing and infrastructure markets, where the government has been developing few initiatives. To tackle the increased demand for housing, in 2019, the Maltese government announced the delivery of 1,700 new social housing units in the coming years. Moreover, the growing rental demand and increasing rent levels raise concerns over access and affordability for vulnerable families. The government has therefore approved a reform which regulates the rental housing market from 2020 onwards.

With regards to the civil engineering market, the Maltese government is actively involved in upgrading the infrastructure. It invested around €64.0 million in 2019 in more than 14 projects to improve the safety, efficiency and sustainability of Malta’s arterial road network. The government also aims to include investment in roads as part of its potential investment under the cohesion policy for the 2020 2021 period.

Regardless of these short lived disruptions in 2020, the Maltese construction sector is expected to recover and regain its growth pace from 2021 onwards. With several private and public residential, non residential and infrastructure construction projects lined up and awaiting completion in 2020 and 2021, the sector’s long-term outlook remains promising.

Netherlands

Netherlands

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In 2019, the Netherlands’ GDP reached €758.0 billion, exhibiting a 14.0% growth as compared to the 2010 level. This represents a 1.8% increase over the previous year (€744.5 billion).

The Netherland’s GDP performed well in 2019, mainly driven by robust domestic demand and investment, which benefited from low capital cost and high profitability, despite a more challenging environment.

Number of enterprises in the broad construction sector between 2010 and 2019

+42.3%

In parallel, the number of enterprises in the broad construction sector increased by 42.3%, from 191,668 in 2010 to 272,655 in 2019, with the architectural and engineering activities sub-sector registering the highest increment of 66.8%, followed by the narrow construction sub-sector (+49.0%) over the 2010 2019 period.

The volume index of production in the broad construction sector experienced an increment of 19.5% over the period of 2015-2019.

The total turnover of the broad construction sector in 2017 stood at €155.7 billion, a 14.1% increase compared to 2010. It further increased to €172.7 billion in 2019, a 26.5% increase since 2010. This overall increase was mainly driven by turnover growth in the architectural and engineering activities (+41.9%), the narrow construction (+26.9%), the real estate activities (+25.3%), and the manufacturing (+11.3%) sub-sectors over the 2010 2019 period.

Turnover in the architectural and engineering activities sub-sector between 2010 and 2019

+41.9%

Similarly, the gross operating rate of the broad construction sector, which gives an indication of the sector’s profitability, stood at 18.8% in 2017, 3.0 percentage points (pps) higher than 2010 (15.8%) and above the EU-27 average of 16.6%.

In terms of employment, there were 745,699 persons employed in the broad construction sector in 2019, marking a 0.8% decline as compared to the 2010 level (751,562). This was mainly due to a decline experienced in the manufacturing ( 14.9%), the real estate activities (-8.9%) and the narrow construction (-1.4%) sub-sectors, offsetting the rise in the architectural and engineering activities sub sector (+16.8%), during the same reference period.

Currently, there are two main issues hindering the development of the Dutch construction sector. Firstly, the Dutch construction sector faces a shortage of skilled workers, in part due to inappropriate vocational education training (VET). This issue is becoming an obstacle for the firms’ business operations, resulting in a rise in unfilled job vacancies . Despite the high tertiary attainment rate of 49.4% in 2018 , demand for high-skilled workers and medium-skilled workers is expected to grow by 2.4 million and 1.3 million respectively until 2025.

Secondly, delays were experienced in infrastructure and construction projects due to the Perfluoroalkyl and Polyfluoroalkyl Substances (PFAS) and nitrogen problems. Around 18,000 building projects in the Netherlands have been delayed due to the breach of EU laws . This related to the government’s Nitrogen Repair Programme (PAS), which was judged by the Council of State to be contrary to European legislation (the Habitat and Natura 2000 Directive). Therefore the permits became null and void.

The housing market is expected to generate significant business opportunities for the construction sector, supported by some government measures. The Dutch government set a target for constructing 75,000 new homes per year until 2025. In addition, it has also announced a package worth €1.0 billion in investment subsidies, aimed at boosting housing construction. This amount will be distributed over a period of four years, provided to the municipalities where shortages are most acute.

With regards to the civil engineering market, the Netherlands’ long-term infrastructure and transport plan (Meerjarenprogramma Infrastructuur, Ruimte en Transport, MIRT) explains the investment plans for the 154 infrastructure projects currently in progress. This pipeline of projects may increase as part of the EU recovery package and the upcoming Multi-annual Financial Framework.

The COVID-19 pandemic has had limited impact on the ongoing projects in the Netherlands. Nevertheless, the worsening economic outlook is expected to weigh down on the construction sector output growth. The sector is expected to rebound, particularly in 2021, as the measures (like lockdown and social distancing) are lifted.

Poland

Poland

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In 2019, Poland’s GDP amounted to PLN 2,136.2 billion (€470.0 billion), representing a 4.1% growth compared to 2018. The growth was primarily driven by the robust domestic demand and relatively favourable export performance as compared to several other EU economies.

Number of enterprises in the broad construction sector between 2010 and 2019

+42.5%

Mirroring the overall economy, the broad construction sector in Poland also gained momentum. The sector, mostly comprised of small companies and few large players, totalled 487,174 firms in 2019 (a slight increase of 2.7% over 2018). This represents an increase of 42.5% between 2010 and 2019.

Partly driven by the inflow of EU funds and private investment, the volume index of production in the broad construction sector grew significantly.

The volume index production in broad construction sector recorded a growth of 21.7% over the 2015-2019 period, after recording a drop of 14.1% in 2016 over 2015.

Partly driven by the inflow of EU funds and private investment, the volume index of production in the broad construction sector grew significantly.

Similarly, the total turnover of the broad construction sector amounted to €89.1 billion in 2017, 14.4% above the 2010 levels. It further reached €121.0 billion in 2019, representing an increase of 25.1% during the 2010-2019 period.

Turnover in the broad construction sector between 2010 and 2019

+25.1%

At the same time, the gross operating surplus of the broad construction sector only recorded a slight increase of 2.8% between 2010 and 2017, reaching €14.7 billion. This was mainly driven by declines in the real estate activities sub-sector ( 26.1%), and the architectural and engineering activities sub sector ( 13.9%). These declines were partly compensated by the gross operating surplus increase of the manufacturing (+19.5%) and the narrow construction (+15.2%) sub sectors, over the same period.

In contrast, the gross operating rate of the broad construction sector, which gives an indication of the sector’s profitability, declined from 14.7% in 2010 to 13.2% in 2017. This is below the EU-27 average of 16.6%.

In terms of employment, there were 1,686,851 persons employed in the broad construction sector in 2019, which represents an 18.1% increase since 2010. This was mainly driven by the increase in terms of people employed in the sub sectors including architectural and engineering activities (+24.7%), followed by the narrow construction (+20.1%), manufacturing (+15.2%) and real estate activities (+6.7%) sub sectors in the same period.

The Housing for the Young scheme programme (Mieszkanie dla Mlodych, MdM), which drove the demand for flats in Poland, ended in 2018, as government subsidies ran out. The program has been replaced by the 'National Housing Program'.

Declining mortgage interested rates has also fuelled the housing demand in Poland. Interest rates on mortgages (for over 5 years of original maturity) fell from 6.0% in 2010 to 3.7% in 2019.

House price index between 2015 and 2019

+16.0%

During the period 2015-2019, the house price index for dwellings in Poland increased by 16.0%. The increase in home prices was mainly driven by the housing demand and growing construction costs, which relate to a strong construction demand in the entire economy.

The investment index in the broad construction sector experienced a steady growth since 2015, rising by 4.4% over 2015-2019. This trend was mainly driven by investment in non-residential construction and civil engineering which increased by 5.3% between 2015 and 2019.

Investment index in the broad construction sector between 2015 and 2019

+4.4%

In April 2020, the Polish government announced its plans to invest PLN 30.0 billion (€6.6 billion) in roads and railway infrastructure in 2020. The investment would include contracts worth PLN 11.0 billion (€2.4 billion) in railway developments and PLN 19.0 billion (€4.2 billion) for highway construction.

In October 2019, the EU introduced plans to invest more than €880 million (€193.6 million) in two projects to improve the rail network in Poland.

In terms of BIM adoption, Poland is still at an early stage, with only 12% of construction firms using BIM in their daily work. The sector tends to use BIM mainly for visualisation, 3D models, and to a lesser extent for collision detection and use of schedules or optimisation. Nevertheless, the Polish government is planning to introduce standards or an obligation to use BIM in public procurement.

The ongoing COVID-19 pandemic is expected to have short-term and long-term impact on the construction sector. For instance, some Polish construction companies have shut down, and some construction projects were put on hold. Nevertheless, the sector is not expected to experience a significant decline, primarily driven by the measures taken by the government.

Portugal

Portugal

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Since 2010, Portugal’s GDP has grown by 6.2%, amounting to €199.0 billion in 2019. This represents a 2.2% growth compared to the 2018 level (€194.8 billion).

As compared to 2018, Portugal’s GDP growth moderated in 2019 due to lower external demand as net exports reduced, while domestic demand remained resilient.

Number of enterprises in the broad construction sector in Portugal between 2010 and 2019

-1.6%

The Portuguese construction sector declined from 2010 to 2014 and has been getting better since 2015. In fact, the number of enterprises in the broad construction decreased by 20.3% over the 2010 2014 period. It then experienced a growth of 20.8% between 2015 and 2019, totalling 178,084 firms. This marks a slight reduction of 1.6% during 2010 2019.

At the same time, the volume index of production in the Portuguese broad construction sector registered a slight growth of 4.1% between 2015 and 2019. It was mainly driven by the 4.1% and 4.0% growth in the construction of civil engineering and construction of buildings, respectively during the same period.

In 2017, the total turnover of the broad construction sector stood at €36.2 billion, representing a decline of 29.1% compared to 2010 (€51.1 billion). It further increased to €41.6 billion in 2019, registering an 18.6% decrease over the 2010-2019 period. The overall decline was mainly driven by a 37.5% decrease in the narrow construction sub-sector. In contrast, the real estate activities, the architectural and engineering activities and the manufacturing sub sectors posted a growth of 57.0%, 4.2% and 1.7% respectively, in the same period.

Total turnover of Portuguese broad construction sector between 2010 and 2019

-18.6%

Similarly, the gross operating surplus in the broad construction sector declined by 15.9% during 2010 2017, reaching €4.2 billion. The decline was mainly due to weak performance recorded by the narrow construction (-43.3%), architectural and engineering activities (-16.6%) and manufacturing ( 3.5%) sub-sectors over the 2010-2017 period. In contrast, the real estate activities sub-sector recorded a growth of 39.8% during the same period. Correspondingly, the gross operating rate of the broad construction sector, an indicator of the sector’s profitability, increased from 9.7% in 2010 to 11.5% in 2017, which remains below the EU 27 average of 16.6%.

Number of persons employed in the Portuguese broad construction sector between 2010 and 2019

-15.3%

In the context of employment, there were 547,349 persons employed in the Portuguese broad construction sector in 2019, representing a decline of 15.3% since 2010. This was mainly due to reductions recorded in the employment for the narrow construction (-24.4%), manufacturing ( 13.6%) and architectural and engineering activities (-3.5%) sub-sectors over 2010-2019 period. In contrast, the real estate activities sub sector experienced an increase of 44.6% in the same period.

In order to provide housing to everyone and make it affordable, the Portuguese government has taken several measures. Under the Financial instruments for urban rehabilitation and revitalisation (IFRRU 2020) programme, a total of 151 funding contracts worth €479.0 million were signed by September 2019, to renovate and improve the energy efficiency in buildings. Contracts signed are expected to deliver housing for 995 new residents, renovate 770 households and create 2,684 jobs by September 2020. In addition, the Portuguese Parliament passed a law on the 'Right to Housing', in July 2019, that lays down a legal basis for housing, which is now considered a citizen’s right. The law became effective on October 1, 2019.

Currently, the Portuguese construction companies are struggling with a shortage of craftsmen (bricklayers, electricians) in the construction sector. In order to compensate for the shortage of labour, the companies are importing workers. However, such a process is undermined by several barriers such as low salaries (in comparison to some other European countries) and a complex tax system. Finally, the issue of late payment, coupled with the limited access to finance (both issues disproportionally affecting MSMEs) limit the liquidity of the sector. Both factors limit the growth of the MSME segment in the construction sector.

The outlook for the Portuguese construction sector remains positive, driven by housing and non residential markets. The former is driven by i) foreign investment in high quality real estate projects; and ii) government policy as the IFFRU programme but also policy initiatives related to supporting energy efficiency renovation, and planned investments in affordable housing. The non-residential market is also expected to grow, with tourism-related investments such as hotels, restaurants and more generally hospitality facilities.

In addition, programmes launched by the government such as the National Investment Programme 2030 (PNI) will support the civil engineering market growth. This programme is designed to provide investments worth €22.0 billion into the areas of transport, energy and environment projects. In addition, Portugal is planning to invest €300.0 million by 2030 for the construction of new bike lanes, to encourage the use of bicycles in place of cars.

According to the Portuguese Federation of the Construction and Public Works Industry (Federação Portuguesa da Indústria da Construção e Obras Públicas - FEPICOP), the Portuguese construction sector is expected to continue to grow during the crisis mainly due to non residential and housing projects . According to FEPICOP, such a growth is estimated to be about 2.0% to 3.0% in 2020 and 2021. More specifically, the narrow construction sector is expected to grow by 0.6% in 2020, following the COVID-19 impact.

Romania

Romania

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In 2019, Romania’s GDP grew by 4.1% in comparison with 2018, reaching RON 869.5 billion (€178.4 billion). The growth was mainly driven by strong private consumption.

Number of enterprises in the architectural and engineering activities sub-sector between 2010 and 2019

+46.2%

At the same time, the number of enterprises in the broad construction sector in Romania represented an increase of 16.8% between 2010 and 2018, totalling 97,601. The growth was due the increase in the number of enterprises in the narrow construction sub sector (+57.3%), followed by the real estate activities (18.2%), the architectural and engineering activities (16.7%) and the manufacturing (7.8%) sub-sectors. Over the period 2010-2019 , the architectural and engineering activities sub-sector experienced the highest increase of 46.2%, which was followed by a 14.7% increment in the narrow construction sub sector.

The volume index of production in the broad construction sector recorded an increase of 10.8% during 2015-2019, mainly driven by a 43.4% increase in the construction of buildings. This was partly offset by a decline of 11.5% in the volume index production in the construction of civil engineering over the same period.

Volume index of production in the construction of buildings between 2015 and 2019

+43.4%

Turnover in the architectural and engineering activities sub-sector between 2010 and 2018

+47.5%

Furthermore, turnover in the broad construction sector amounted to €30.9 billion in 2018, marking a 20.9% increase compared to the 2010 level (€23.4 billion). The growth was mainly driven by the increases in the sub sectors, including the real estate activities (+66.1%), the manufacturing (+44.4%), and the architectural and engineering activities (+26.8%), over the 2010 2018 period. During 2010-2019 , the architectural and engineering activities sub-sector registered the highest increase in turnover (+47.5%), ending at €2.5 billion. It was followed by the manufacturing (+29.8%) and the narrow construction (+10.3%) sub-sectors, reaching €5.6 billion and €19.1 billion in 2019 respectively.

Similarly, the gross operating rate of the broad construction sector, which is used to assess the profitability of the sector, stood at 18.3% in 2018, 0.8 percentage points (pps) lower than in 2010 (19.1%). Among the sub-sectors, real estate activities remained the most profitable (46.9%), followed by the architectural and engineering activities (19.2%), the narrow construction (14.8%), and the manufacturing (12.5%) sub-sectors in 2018.

In terms of employment, there were 512,995 persons employed in the Romanian broad construction sector, 13.2% below the 2010 level (591,275 persons). This was mainly due to the decline registered in the number of persons employed in the manufacturing (-13.0%) and the narrow construction (-7.7%) sub sectors, over the 2010-2019 period. In contrast, the number of persons employed increased by 16.5% in the architectural and engineering activities sub-sector over the same reference period.

In the context of the housing market, residential construction remained strong, while house prices were quite stable. In order to facilitate access to housing loans and stimulate the construction sector, the Romanian government has taken several initiatives, notably the First Home Programme. By the end of 2019, under the First Home Programme, more than 260,000 first time buyers were granted financial assistance worth a total of RON 24.9 billion (€5.2 billion) for the purchase or construction of housing.

In order to ensure better access for Roma people to decent housing, and enhance their quality of life, the National Housing Agency (ANL) continued to implement the pilot programme ‘Social Housing for Roma Communities’.

In terms of the civil engineering market, the EU has been supporting investments in Romania through the European Fund for Strategic Investments (EFSI). Total financing under EFSI amounted to €722.0 million by November 2019 and is expected to trigger EUR 3.0 billion in additional investments in the country. Out of this €722.0 million, €519.0 million was allocated to infrastructure and innovation projects approved and financed by the EIB.

Furthermore, Romania received €118.0 million for ten key transport infrastructure projects through the EU’s grant scheme from the Connecting Europe Facility in July 2020. The funding comes as part of a €2.2 billion economic recovery initiative for all EU countries for 140 infrastructure projects.

In terms of challnges, Romania currently faces is high labour shortages in the construction sector. This is mainly due to low wages, migration to the western Europe countries and the absence of vocational schools that could form the new generation of construction workers. This could limit the recovery and growth of the sector.

The outlook for the Romanian construction sector is positive in the medium to long term. Moreover, investments led by the EU for infrastructure projects is expected to contribute to the growth of the construction sector.

Slovakia

Slovakia

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After growing by 4.0% in 2018, the economic growth of Slovakia, in terms of GDP, slowed down by 2.3% in 2019. The country’s GDP amounted to €89.3 billion in 2019.

The slower growth in 2019 was mainly due to lower net exports, due to both lower foreign demand and temporary domestic factors, such as changes and delays in production in the large, export-focused automotive sector. Nonetheless, strong domestic demand, low unemployment and rising wages have boosted private consumption.

Number of enterprises in the broad construction sector between 2010 and 2019

+20.3%

In line with the overall economy, the broad construction sector in Slovakia also gained momentum. The number of enterprises in the sector totalled 145,042 firms in 2019 (an increase of 6.0% and 20.3% over 2018 and 2010 respectively).

In contrast, the volume index of production in the construction of civil engineering and narrow construction sub-sector declined by 16.9% and 3.5% respectively compared to 2015. The fall in 2019 ( 13.6 index points-ip vs 2018) was partially due to a significant decline in the development of utility and power networks. Nonetheless, construction of buildings registered a slight increase of 1.7% during the 2015-2019 period. .

Volume index of production in construction of civil engineering between 2015 and 2019

-16.9%

Turnover in the broad construction sector between 2010 and 2019

+52.0%

The total turnover in the broad construction sector stood at €18.6 billion in 2017, representing an increase of 26.6% compared to 2010 (€14.7 billion). In 2019, it increased to €22.3 billion, representing an increase of 9.7% over the previous year and a 52.0% increase over 2010. This overall increase in 2019 was driven by the growth in the architectural and engineering activities (+76.8%), manufacturing (+59.3%), narrow construction (+54.3%) and real estate activities (+28.5%) sub sectors.

In contrast, the gross operating surplus of the broad construction sector amounted to €2.6 billion in 2017 , a 6.6% drop from 2010, owing to an increase in construction costs. The largest decrease in the gross operating surplus was registered in the narrow construction sub-sector ( 14.7%), followed by the real estate activities sub sector (-10.1%). In contrast, the gross operating surplus in the architectural and engineering activities and manufacturing sub-sectors recorded increases of 36.2% and 22.2% respectively, over the same period.

Similarly, the gross operating rate of the broad construction sector, which gives an indication of the sector’s profitability, decreased from 18.9% in 2010 to 14.0% in 2017, below the EU-27 average of 16.6%.

In terms of employment, there were 280,252 persons employed in the Slovak broad construction sector in 2019, representing an increase of 8.8% over 2010. This was driven by a rise in employment in the architectural and engineering activities (22.0%), real estate activities (16.7%), narrow construction (6.9%) and manufacturing (4.9%) sub sectors during the same period.

Meanwhile, the housing market in Slovakia is characterised by increasing house prices. The latter have outpaced wage growth, by five percentage points since 2014, thus worsening housing affordability despite low financing costs . In fact, the house price index for total dwellings in Slovakia increased by 32.4% during the 2015-2019 period.

House price index between 2015 and 2019

+32.4%

At the same time, even though it increased, the housing supply is not expected to fully meet the demand in the near future. In 2018, the number of completed dwellings grew by 10.6% year on year (YoY), reaching more than 22,000 dwellings, the highest level since the crisis. However, in March 2020, it stood at 4,587 units, marking a decrease from the previous number of 6,801 units for December 2019. In addition, following the outbreak of COVID-19 and market related uncertainty, the preparation of the new projects for house (dwelling) buildings is delayed. Therefore, it is expected that there will be a significant gap in the outputs of the building sector in the next year.

The government of Slovakia has taken several initiatives addressing some of the issues observed in the housing market. In 2019, it introduced the ‘Boarding house’ measure, which aims to provide long-term accommodation to the employees originating from distant regions of Slovakia or even foreign workers. However, this measure has not yet translated into practice as the specific schemes and/or (financial) instruments as well as the total government investment amount are still to be defined.

The Slovak government allocated €20.0 million to support housing for 2020-2022. This is 50% less as compared to the 2019 allocation (€40.0 million).

Thus, reduced financial allocation from public sources may slow down the development and implementation of housing policies and thus aggravating the problem of affordability.

The EU also plays an important role in supporting infrastructure development in Slovakia, thus providing further market opportunities for the construction sector. In the 2014-2019 period, investments driven by the European Regional Development Fund and the Cohesion Fund led to the construction or modernisation of 123 kilometres of roads.

Due to the decline in demand caused by the COVID 19 pandemic, delays are expected in the commissioning of projects that are in the later stages of construction. Additional negative impacts include higher project costs, skilled labour shortage and additional business insolvencies in the construction sector.

Slovenia

Slovenia

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Since 2010, Slovenia’s GDP has increased by 17.7%, amounting to €44.8 billion in 2019. This also represents an annual growth of 2.4% compared to the 2018 levels.

Slovenia’s GDP performed well in 2019, mostly driven by rising private consumption, sustained domestic demand as well as increased investment in residential construction, machinery and equipment.

Mirroring this growth, the number of enterprises in the broad construction sector increased by 18.1%, from 28,771 in 2010 to 33,972 in 2019, with the real estate activities sub-sector reporting the highest increase of 62.2%, followed by the architectural and engineering activities sub-sector (+46.7%) over the 2010-2019 period.

Volume index of production in the construction of buildings between 2015 and 2019

57.9%

In parallel, the volume index of production in the broad construction sector increased by 19.8% over the 2015-2019 period, mainly driven by a 57.9% increase in the production activity in the construction of buildings during the same reference period. In parallel, the production in civil engineering increased by 7.5% between 2015 and 2019.

The total turnover in the broad construction sector stood at €8.8 billion in 2017, representing a decline of 10.3% compared to 2010 (€9.8 billion). It further increased to €10.8 billion in 2019, a 9.8% increase since 2010. This overall increase was mainly driven by growth in the architectural and engineering activities (+14.7%), the manufacturing (+14.0%) and the real estate activities (+9.6%) sub sectors over the 2010-2019 period.

Turnover in the architectural and engineering activities sub-sector between 2010 and 2019

+14.7%

Similarly, the gross operating surplus of the broad construction sector recorded a significant increase of 49.7% between 2010 and 2017, reaching €1.1 billion. The majority of this increase was driven by growth in the narrow construction sub sector (+64.9%), followed by the manufacturing (+61.8%) and the architectural and engineering activities (+53.4%) sub-sectors over the 2010-2017 period. Furthermore, the gross operating rate of the broad construction sector, an indicator of the sector’s profitability, increased from 7.2% in 2010 to 12.1% in 2017. This is still lower than the EU-27 average of 16.6%.

In terms of employment, there were 110,152 persons employed in the broad construction sector in 2019, representing a drop of 4.1% since 2010. This was primarily due to the fall in employment in the manufacturing (-14.3%) as well as the narrow construction (-6.1%) sub-sectors, offsetting the rise in the real estate activities (+16.4%) and the architectural and engineering activities (+13.3%) sub sectors during the same reference period.

Essentially, there are two major issues hindering the development of the Slovenian construction sector. Firstly, the issue of late payments by the customers. The outbreak of COVID-19 pandemic has made the situation even more difficult. According to the European Payment Report 2020, 50.0% of the SME respondents expect late payments to have a high impact on liquidity squeeze, slightly above the EU average of 45.0%. Secondly, the existing shortage of skilled labour continues to be a major concern for the sector.

In 2019, almost 40.0% of the employers in the construction sector reported labour shortages. Moreover, according to the CEDFOP Skills Panorama, more than one-fourth (+27.7%) of the workers employed in the Slovenian construction sector in 2018 were aged between 50-64 years , nearing retirement.

Despite a considerable growth in business enterprise R&D expenditure (BERD) over the 2010 2017 period, total investment is still limited. Additionally, the number of construction-related patent applications have declined from five in 2018 to two in 2019. Slovenia also faces challenges in the innovation front due to the lower digital skills level of its workforce and inadequate integration of digital technologies into business. However, the country has started making progress in this front.

The outlook for the broad construction sector remains promising with the Slovenian Housing Fund planning to build 2,000 new rental apartments by the end of 2020 and eventually, 10,000 units by the end of 2050. In the civil engineering segment, the construction of the second track of the Divača–Koper line, reconstruction of Karavanke Tunnel as well as the upgrading of the Zidani Most–Celje and Maribor–Šentilj lines, the Pragersko hub and the Ljubljana–Kranj–Jesenice line are also progressing well. Additionally, the construction of the second tube of the Karavanke motorway tunnel is expected to start in 2020.

The Slovenian construction sector faced some short disruptions resulting from the three-month long COVID-19 lockdown in the country. The existing construction projects have resumed their activities and the sector is forecasted to see major improvements from 2021 onwards, following broader macro economic trends.

Spain

Spain

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The Spanish economy recorded a moderate growth in 2019. After expanding by 2.4% in 2018, GDP growth decelerated to 2.0% in 2019, reaching €1.2 trillion.

In 2019, the slow-down in growth was the result of weakened domestic demand due to lower private consumption and investment.

Number of enterprises in the real estate activities sub-sector between 2010 and 2019

+50.4%

In parallel, the number of enterprises in the broad construction sector grew by 13.4% between 2010 and 2019, totalling 723,507. This growth was primarily driven by an increase in the number of enterprises in the real estate activities (+50.4%), and the narrow construction (+9.6%) sub-sectors over the same reference period.

Similarly, the volume index of production in the broad construction sector grew by 3.1% during 2015-2019, mainly driven by growth in the construction of civil engineering (+5.8%) and construction of buildings (+2.9%) over the same period.

Conversely, the turnover in the broad construction sector marked a decline of 18.2% between 2010 and 2018, reaching €226.7 billion. Nonetheless, it increased to €239.4 billion in 2019, corresponding to a 13.7% decline since 2010. The downturn was primarily due to a 23.5% decrease in turnover in the narrow construction sub-sector between 2010 and 2019, followed by a 3.2% decline in the manufacturing sub-sector. On the contrary, the real estate activities and the architectural and engineering activities sub-sectors grew by 43.9% and 4.5%, respectively, over the same reference period.

Turnover in the real estate activities sub sector between 2010 and 2019

+43.9%

In parallel, the gross operating rate of the broad construction sector, which is used to assess the profitability of the sector, stood at 12.4% in 2018, 0.6 percentage points (pps) below the rate registered in 2010 (13.0%). The real estate activities sub-sector registered the largest profit margin on sales (33.7%) in 2018, followed by the architectural and engineering activities (13.2%), the manufacturing (9.8%), and the narrow construction (8.5%) sub-sectors.

Number of persons employed in the real estate activities sub sector between 2010 and 2019

+39.0%

In terms of employment, there were 2,114,455 persons employed in the Spanish broad construction sector, marking an 11.5% decline in comparison to the 2010 level (2,389,628 persons). This was mainly due to the decrease registered in the number of persons employed in the manufacturing (-19.7%) and the narrow construction (-18.2%) sub-sectors, over the 2010 2019 period. On the contrary, the real estate activities and the architectural and engineering activities sub sectors witnessed growth of 39.0% and 1.2%, respectively in the same period.

While the housing market and construction sector continued to recover from the sharp adjustment that followed the 2008 economic crisis, some key indicators of housing activity, such as the number of housing transactions and new mortgages, slowed down in 2019. This can be partly explained by the changes in the mortgage legislation enacted in the first months of the year. In order to ensure the availability of affordable and quality housing, the Spanish government has taken several measures.

In December 2020, the Spanish government introduced amendments to the State Housing Plan 2018-2021 including the extension of support to young people to buy a property, both in villages and population centres with fewer than 5,000 inhabitants.

Furthermore, under the ‘Malaga Social and Affordable Housing I’ project, Spain received €37.0 million from the European Investment Bank (EIB) for urban development in December 2020. The project consists of the construction of approximately 525 social and affordable housing units for rent in the city of Malaga.

Nonetheless, the COVID-19 pandemic has considerably impacted the Spanish housing market. In April 2020, house sales dropped by 39.2% Y-o-Y (year-on-year).

The civil engineering segment is expected to benefit from investment in the areas of transport infrastructure and urban development, partly driven by EU funds. The EU Cohesion Policy has allocated €8.5 billion for sustainable growth and transport. In addition, Spain also received approximately €1.6 billion from the EIB in 2020 specifically for the development the country’s transport infrastructure.

While the Spanish construction sector’s prospects are expected to be positive on the mid to long-term, it faces some key challenges. These include labour shortage, the issue of late payment, as well the indebtedness of construction SMEs. These may threaten the long term sustainable development of the sector.

The COVID-19 pandemic is expected to have a limited impact on the ongoing infrastructure projects in Spain. While residential and commercial sectors are going to be adversely affected, the civil engineering sector is expected to maintain growth momentum, mainly supported by public spending.

Sweden

Sweden

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Over the 2010-2019 period, Swedish GDP increased by 20.5%, totalling SEK 4,610.9 billion (€443.1 billion) in 2019. This represents an annual growth of 1.2% compared to 2018 levels.

In 2019, Swedish economic growth slowed down primarily due to a deceleration in domestic demand, declining private consumption and rising unemployment rates amid unstable external demand.

Number of enterprises in the manufacturing sub sector between 2010 and 2019

-17.9%

Likewise, the number of enterprises in the broad construction sector experienced a slight increase of 0.9% over the 2010-2019 period, totalling 177,367 in 2019. With regards to sub sectors, the largest increment was reported by the narrow construction (+9.3%) sub sector, followed by the architectural and engineering activities (+4.1%) sub sector, partially offsetting the decline experienced by the manufacturing (-17.9%) and the real estate activities (-13.9%) sub-sectors over the same reference period.

In contrast, the volume index of production in the Swedish broad construction sector increased by 17.9% over the 2015-2019 period, primarily driven by an 18.8% and 2.1% increase in the production of construction of buildings and construction of civil engineering over the same reference period, respectively.

Production in the construction of buildings between 2015 and 2019

+18.8%

Turnover in the narrow construction sub sector between 2010 and 2019

+63.2%

Total turnover in the broad construction sector increased to €141.7 billion in 2018, representing an increment of 49.0% since 2010. However, it declined to €138.8 billion in 2019, resulting in an overall 46.0% increment since 2010. This increase was primarily driven by growth in three sub sectors – the narrow construction (+63.2%), the architectural and engineering activities (+60.5%) and the manufacturing (+33.1%) sub-sectors over the 2010-2019 period.

Conversely, the gross operating rate of the broad construction sector, an indicator of the sector’s profitability, decreased from 16.5% in 2010 to 15.6% in 2018. The real estate activities sub-sector remained the most profitable (40.4%), followed by the architectural and engineering activities (10.8%), the narrow construction (8.0%) and the manufacturing (7.7%) sub-sectors in 2018.

With regards to employment, there were 679,186 persons employed in the broad construction sector in 2019, representing an increase of 26.8% since 2010. This was primarily due to the rise in employment in the architectural and engineering activities (+35.4%), followed by the narrow construction (+28.8%), the real estate activities (+18.5%) as well as the manufacturing (9.7%) sub sectors over the 2010 2019 period.

The Swedish government launched several initiatives aimed at supporting the development of the country’s housing market along with the civil engineering sector.

Amendments were also introduced in the Planning and Building Act to ensure a better and more comprehensive planning. For instance, in March 2020 the Swedish government launched its new Larger Accessory Dwellings Bill, aimed at promoting the construction of accessory dwellings, and at the same time, allowing construction of buildings with higher residential quality.

In terms of the civil engineering market, the transport network was the particular focus of investment under the 2014-2025 national transport plan, with a budget of SEK 522.0 billion (€50.2 billion). Additionally, in June 2018, the government adopted the National Infrastructure Plan 2018 2029, involving a total investment of SEK 700.0 billion (€67.3 billion). Other priority investment projects also included a €277.0 million subsidy for construction investments (the budget is allocated yearly).

Despite these favourable policy initiatives and investment plans, the Swedish construction sector continues to face difficulties on two fronts. Firstly, the construction sector suffers from deteriorating access to finance. There is an ongoing reluctance among banking institutions to provide loans to Swedish construction companies. Moreover, existing government regulations makes it difficult to grant loans to households. Secondly, the ongoing shortage of skilled workers continues to be a major concern for the sector, particularly in the infrastructure market. This is especially challenging since the infrastructure market is quite buoyant as compared to both residential and non-residential markets.

Despite the onset of the COVID-19 pandemic, the Swedish construction sector has a positive outlook in the medium and long-term. The residential market is much resilient compared to other sectors. But there is still a possibility that the aftereffects of the shock in the construction sector might show up later. The infrastructure market continues to perform better than both residential and non residential markets, partly due to its longer planning period. Most of the projects have been postponed to future dates. Nonetheless, the sector is expected to grow from 2021 onwards. Investments in the civil engineering sector are expected to rise with the upcoming projects announced under the National Infrastructure Plan 2018-2029.

United Kingdom

United Kingdom

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Since 2010, the United Kingdom (UK) GDP grew at an average rate of 1.9%, amounting to GBP 2,045.7 billion (€2,261.0 billion) in 2019. This is 1.5% above the 2018 levels.

However, since 2016, the GDP growth rate slowed down primarily due to a limited growth in private consumption despite a rising real wage growth. Overall, the general investment also remained muted owing to the uncertainty over UK’s future trading relations with the EU.

Number of enterprises in the broad construction sector between 2010 and 2019

+32.3%

In line with the overall economy, the broad construction sector in the UK also gained momentum. The number of enterprises in the broad construction sector totalled 554,594 in 2019 , representing an increase of 32.3% over the 2010-2019 period. This growth is primarily attributable to a 74.5% increase in the architectural and engineering sub-sectors.

After witnessing a drop in 2012, the volume index of production in the broad construction sector has been on a constant rise, increasing by 12.7% over the 2015 2019 period. In parallel, the construction of civil engineering and buildings also experienced a growth of 22.6% and 11.3% respectively during the above-referred period.

Volume index of production in the broad construction sector over the 2015-2019 period

+12.7%

Turnover in the broad construction sector between 2010 and 2019

+45.2%

The total turnover in the broad construction sector stood at €450.1 billion in 2017, representing an increase of 32.9% compared to 2010 (€338.7 billion). It further increased to €491.6 billion in 2019, a 45.2% increase since 2010. This overall increase was mainly driven by growths in the narrow construction (+46.6%), architectural and engineering activities (+64.4%) and real estate activities (+36.5%) sub-sectors over the 2010-2019 period.

Similarly, the gross operating surplus of the broad construction sector recorded a substantial increase of 65.0% between 2010 and 2017, reaching €118.1 billion. This was primarily driven by an increase in the manufacturing sub-sector (142.6%), followed by the narrow construction (101.5%) and architectural and engineering activities sub-sectors (74.9%) over the same period.

Correspondingly, the gross operating rate of the broad construction sector, an indicator of the sector’s profitability, increased from 21.1% in 2010 to 26.2% in 2017. This is well above the EU-27 average of 16.6%.

In terms of employment, there were 2,748,292 persons employed in the UK broad construction sector in 2019, representing an increase of 12.1% over 2010. This was driven by a rise in employment in the architectural and engineering activities (32.3%), real estate activities (9.0%) and narrow construction (8.4%) sub-sectors during the same period.

In parallel to the growth in employment, the UK housing market is facing two key issues. House prices have increased significantly in recent years, adding pressure to the shortage of affordable housing in the country. Although residential construction also picked up recently partly due to the implementation and further extension of the government’s ‘Help to Buy’ scheme through March 2023, it is still not enough to meet the overall market demand.

According to a research by Heriot-Watt University, England has a backlog of 3.9 million homes. This means that to satisfy the actual demand, 340,000 new homes need to be built each year until 2031 (including 90,000 for social rent). This is well above the government current target of 300,000 homes annually .

To address this issue, the government added GBP 500.0 million (€552.6 million) in 2018 to the Housing Infrastructure Fund, which is now worth GBP 5.5 billion (€6.1 billion) to support the construction of 400,000 homes by 2021. The British Business Bank also aims to provide guarantees supporting up to GBP 1.0 billion (€1.11 billion) of lending to SME house builders through its new scheme.

House price index growth between 2015 and 2019

+16.8%

Further, the UK government has also extended its National Productivity Investment Fund (NPIF) until 2024, to be used for productivity investment in transport, digital communication, R&D and housing. The NPIF is also financing investments in infrastructure, housing and research and development (R&D) over 2017-2022. In addition, the National Infrastructure Delivery Plan 2016-2021 includes a GBP 600.0 million (€663.2 million) infrastructure pipeline.

Currently, UK’s infrastructure networks are under pressure with its rail, road and aviation networks reaching their capacity limit. The country has already started taking steps to cover its infrastructure deficit. In July 2018, the National Infrastructure Commission (NIC) published its long-term infrastructure needs assessment for the period 2018-2050. A full government response under ‘National Infrastructure Strategy’ is under consideration.

Post Brexit, UK’s access to European Investment Bank (EIB) funding will cease. This will have a major impact on the country’s future construction pipeline as the EIB held an important role in funding particularly infrastructure projects.

The UK broad construction sector is also suffering from labour shortages. By early 2020s, almost 20.0% of the construction workforce will have already reached or be close to retirement age, creating a serious labour shortage situation for the sector. UK’s exit from the EU Single Market is mostly likely to worsen the current skill shortage for the construction sector, particularly if no follow-up agreements on free movement of people is enacted with the EU.

The ongoing COVID-19 pandemic is also expected to have both short- and long-term impacts on the construction sector. With most of the construction projects being put on hold or shut down, this has resulted in a substantial negative effect on the construction sector in the form of higher project costs, skilled labour shortage and additional business insolvencies.