Binnenmarkt, Industrie, Unternehmertum und KMU

European construction sector observatory

European construction sector observatory

The European construction sector observatory (ECSO) is an initiative under COSME. It regularly analyses and carries out comparative assessments on the construction sector in all 27 EU countries and the UK – aiming to keep European policymakers and stakeholders up to date on market conditions and policy developments.

What are ECSO's objectives?

  • to monitor market conditions and trends, as well as national/regional strategies and progress towards the 5 priorities of construction 2020
  • to encourage knowledge sharing and the replication of good practice
  • to raise awareness on policy measures and initiatives impacting the construction value chain

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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. Each CFS provides an analysis of key figures, 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.

To view and download ECSO findings, please click on a country on the map below. All EU countries and the UK have data available and are marked in blue.

Austria

In 2018, the Austrian GDP grew by 2.7%, which is slightly above the growth experienced in the previous year (2.6%). This continued growth supported the development of the broad construction sector. In fact, the volume index of production in construction and in the construction of buildings rose by 16.8% and 18.3% respectively between 2015 and 2018. Put in comparison to 2010, these indicators grew by 19.1 and 18.6 index points.

Volume index of production in construction between 2015 and 2018 rose by 16.8 percent

Reflecting the increased volume index of production, the turnover in broad construction sector marked a strong increase between 2010 and 2018 (+30.1%), reaching EUR 92.4 billion, its highest level in this period. Such turnover growth was driven by the increase experienced in all construction sub sectors. In particular, the real estate activities and architectural and engineering activities sub-sectors grew by 39.7% and 37.6% between 2010 and 2018. At the same time, the narrow construction sub-sector accounted for 55.6% of the total turnover of the sector in 2018.

Total turnover in the broad construction amounted to EUR 92.4 billion in 2018 and is projected to increase by 4.8% in 2019.

These improvements are partly explained by the increasing apparent labour productivity across all construction sub sectors. The manufacturing, narrow construction sub sector and real estate activities experienced a double-digit growth between 2010 and 2018 (+19.8%, +15.4% and 16.6%). The gains in apparent labour productivity can be linked to the increasing adoption of technology and digital innovation, such as the use of drones and BIM in construction activities.

Apparent labour productivity in narrow construction sub sector between 2010 and 2018 rose by 15.4 percent

Following the increase of production and turnover, the total number of persons employed in broad construction sector in Austria reached 502,330 in 2018, marking a 16.0% increase since 2010. While the narrow construction sub sector accounted for 63.5% of the number of people employed in the broad construction sector, it is the architectural and engineering activities sub-sector and the real estate activities sub sector which contributed most to the employment growth of the broad construction sector (+26.5% and +20.4% respectively between 2010 and 2018).

While the Austrian broad construction sector faces labour and skills shortage, the government has developed several initiatives aiming to mitigate it. As a result, Austria scores relatively well in the area of vocational education and training (VET) for construction, due to its efforts in modernising the apprenticeship systems. To counter the declining trend in participation rates of VET, some initiatives were launched, offering incentives for both apprentices and companies to support employees’ participation in educational programmes. These increasingly include software and other digital-related trainings.

Housing market is considered to be one of the main drivers of the broad construction sector in Austria.

The demand in the housing market is supported by declining interest rates on mortgage loans; rising households’ income and increasing numbers of households (+8.1% between 2010 and 2018). At the same time, the investments in dwellings increased by 34.7% in the same period, reaching EUR 17.3 billion in 2018. However, the housing supply seems to be lagging behind and push the house price index up (+19.6% between 2015 and 2018).

Investments in dwellings between 2010 and 2018 rose by 34.7 percent

Investment in non-residential construction and civil engineering also grew in 2018 (+10.0% between 2010 and 2018). This was primarily propelled by investments in rail and road infrastructure maintenance. The share of non-residential construction and civil engineering investments remain important, accounting for 58.5% of total investments in the broad construction sector in 2018.

Investments in non-residential construction and civil engineering between 2010 and 2018 rose by 10 percent

The outlook for the Austrian broad construction sector should continue to be positive for the coming years. The issue of shortage of skills is tackled by digitalisation and modernisation efforts of VET programmes. However, increasing attention should be paid to the issue of housing affordability, which may worsen giving the limited financing means made available for social housing and the continuous rise in the housing price index.

Belgium

The Belgian construction sector expanded in 2018, owing to an improving business confidence, increasing domestic demand, high levels of investments and sustained economic growth. The number of enterprises grew at a sustained pace, primarily led by the real estate sub-sector. In parallel, the turnover of the broad construction sector grew by 41.1% between 2010 and 2018.

Turnover growth of the broad construction sector between 2010 and 2018 grew by 41.1 percent

Number of enterprises in the broad construction sector between 2010 and 2018 increased by 33.2 percent

The Belgian housing market is growing. Sustained decline in mortgage interest rates, high employment levels and sustained wage levels supported the demand for housing. This translated in a large increase in residential mortgages, which stood at EUR 246.5 billion in 2018. The latter is more important than the housing supply, as witnessed by the growth of the house price index, which experienced a 9.4% increase over the 2015-2018 period.

However, house price is rising faster than income (4.6% vs. 2.4%). While this contributed to making housing a preferred investment choice, it may also threaten housing affordability, particularly in urban areas of major cities in Belgium.

House price over 2010-2018 grew by 17.5 index points

Outstanding residential loans between 2010 and 2018 grew by 52.4 percent

Consistent increase in housing price index, and high investments in the infrastructure and energy projects, has led to improved optimism among construction companies.

Belgium, being one of the Member States with the highest rail and road densities, has enacted several policies to enhance investment in the infrastructure as well as non-residential real estate.

While this will contribute to the broad construction sector growth, it will also be impeded by the shortage of labour and skills. In fact, the lack of appropriate experience and skills, coupled with uneven reforms in the construction professions, are some of the key challenges weighing down the sector’s growth. Skills gap is one of the main reasons for significantly increased vacancy rates in the real estate and narrow construction sub sectors. This has prompted the sector to invest in training of employees with several initiatives being taken to enhance skills through on-the-job training. At the same time, the number of tertiary students in the areas of manufacturing, processing, architecture, building and construction witnessed robust increase.

The rate of lifelong education in Belgium is increasing, but remains below EU-average rates.

Numerous research centres, clusters, and incubators foster eco-innovation and sustainable construction. Additionally, a substantial increase was noticed in the number of R&D professionals in the narrow construction sub-sector with a specific focus on professional, scientific and technical activities.

The outlook for the Belgian construction sector is positive. Investments in the construction and infrastructure sectors are rising, supported by well performing housing market, easy access to capital and low returns on alternative assets. With some challenges to tackle including skills shortages, the sector is forecasted to grow moderately in the coming years.

Bulgaria

Since 2010, Bulgaria’s GDP has increased by 25.0%, amounting to BGN 102.3 billion (EUR 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.

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 EUR 10.4 billion in 2017, representing a slight increase of 5.3% compared to 2010 (EUR 9.9 billion). It further increased to EUR 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.

Similarly, the gross operating surplus of the broad construction sector recorded a moderate increase of 21.5% between 2010 and 2017, reaching EUR 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%.

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.

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%.

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 EUR 0.2 million in 2012  to EUR 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 (EUR 1.8 billion) with an increased public debt ceiling of BGN 10.0 billion (EUR 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

Over the 2010-2018 period, the Croatian GDP increased by 8.4%, amounting to HRK 356.8 billion (EUR 47.9 billion) in 2018.

The overall business confidence in Croatian economy has also improved, on account of a strong domestic housing demand amidst falling interest rates and government subsidised loans. The volume index of production of the broad Croatian construction sector overall decreased over the period from 2010 to 2018 (37.8 index points - ip), despite continuing increase in 2015-2018 (+10.6 ip).

Volume index of production in the construction over 2010-2018 period decreased by 37.8 index points

The total turnover of the broad construction sector also increased slightly (+2.0%), mainly driven by growth of the turnover in real estate activities (+76.5%) and manufacturing sub-sectors (+39.1%) over the 2010-2018 period.

Turnover in the broad construction sector over 2010-2018 period grew by 2 percent

Apparent labour productivity increased most in the narrow construction (+41.9%) and manufacturing sub-sectors (+36.9%) between 2010 and 2018. The real estate activities, despite a 9.6% decrease in productivity over 2010-2018, still show the highest apparent labour productivity across sub-sectors, standing at EUR 38,200 in 2018. This overall positive development may help explain why the profitability of the construction sub-sector increased by 5.1% between 2010 and 2017.

Gross operating surplus in the broad construction sector over 2010-2017 period increased by 5.1 percent

Despite the increases in terms of profitability and turnover, the total employment in the broad construction sector declined by 10.7% in 2018, compared to 2010 levels. This was mainly driven by a decrease in the number of employees in the narrow construction sub sector (-17.4%). This deterioration was partially mitigated by the improvements in the manufacturing and real estate activities sub-sectors (+6.2% and +26.2% respectively) between 2010 and 2018.

The demand for housing remained strong over the past few years. This is explained by the increase of households’ income, lower mortgage rates and government subsidised loans. In parallel, foreign demand for housing also increased, especially in popular touristic locations and urban areas.

At the same time, the issuance of building permits for residential construction has declined. This contributed to the rise of the house price index (+13.4 ip between 2015 and 2018, but only +2.2 ip in comparison to 2010 level), and housing supply shortage. In particular, the capital city of Zagreb saw one of the highest increases in the housing price index in recent times.

House price index for existing dwellings over 2015-2018 period grew by 13.4 index points

The development of the Croatian housing market is supported by EU funding. In September 2019, the EIB Group approved a EUR 7.0 billion investment to support Croatia’s new social housing scheme, clean energy, sustainable transport, health and environment.

There are two critical issues hindering the development of the Croatian broad construction sector. The first relates to the issue of late payments. Despite improvements in the average payment time for all payment transactions, the time to complete the payment is often higher than the payment terms originally allowed by the companies. Secondly, the lack of professional and skilled workforce in the construction sector continues to be a major concern. Adult participation in learning and training declined from 3.0% to 2.9% between 2010 and 2018.

To address this situation, Croatia has been modernising and implementing on-going reforms in its vocational education and training (VET) system. The Croatian government is also establishing the Croatian Qualification Framework aiming to improve labour market relevance of education.

Launched in 2018, the programme "Dual Education in VET" has been expanded by 13 VET schools for 2019-2020, thus supporting additional work-based learning opportunities. Additionally, an ESF project “Modernisation of the system of continuous VET teachers’ and trainers’ development” has also been implemented to support training of VET school principals.

The government is also taking steps to strengthen the innovation capacity of the construction sector and streamline business process through tax incentives and reduction of administrative burdens on enterprises (e.g. digitalised land registry). The EU played a key role in supporting such a process, through funds like Horizon 2020, which have assisted companies in implementing innovations.

Overall, the outlook for the broad Croatian construction sector is moderately positive, though it relies on EU and national public support. The upscaling and re / up-skilling of existing workforce to meet the sector requirements will play a crucial role in the improvement of business confidence and investments.

Cyprus

The construction sector in Cyprus has been recovering after a severe economic and financial crisis coupled with a housing crisis.

The number of enterprises in the broad construction sector reached its highest level of 14,320 in 2018, growing by 4.7% between 2010 and 2018.

While, volume index of production in the narrow construction sub sector dropped by 53.2 index points between 2010 and 2015, it has since then increased continuously until 2018, growing by 80.7% between 2015 and 2018. The turnover of the broad construction sector declined over 2010-2017 (-21.6%), despite constant increase since 2014 (+62.4%). Strong growth continued in 2018 with a growth of 19.6%.

Production in the narrow construction sub sector between 2015 and 2018 grew by 80.7 percent

In parallel, the gross operating rate of the broad construction sector, which stood at 19.4% in 2010, declined to 10.6% in 2014, before increasing again and reaching 13.5% in 2017.

Construction SMEs continue to struggle with access to finance in 2018. While Cyprus has taken several initiatives supporting banks, the latter still have to deal with high shares of non-performing loans (NPL) on their balance sheets. As a result, domestic savings and foreign investments still continue to be some of the key sources of financing.

After the collapse of the housing market during the financial crisis, the real estate market is showing signs of recovery. In fact, investments in dwellings having been increased by 25.4 percentage points between 2014 and 2017. This trend continued in 2018 and in 2019, reaching levels beyond 2010’s.

In addition, with rising households’ disposable incomes and declining mortgage rates, the demand for housing has been increasing. This demand is not only domestic but also international. Around 48% of new houses in Cyprus are bought by foreigners, under the residence and citizenship conditions (the so-called Golden visa). This demand was matched with a slower growing supply, fuelling the house price increase. In regards with the housing supply, the number of building permits increased significantly (+94.0% between 2015 and 2018).

Number of building permits between 2015 and 2018 grew by 94 percent

The house price index rose (+4.4% between 2015 and 2018), raising issues around house affordability. This has led to regional differences in house prices, with Limassol, consisting of high concentration of foreign community, recording the highest house prices.

Investments in non-residential construction and civil engineering have seen considerable increase since the rebounding of Cypriot economy. The increasing focus on the tourism sector, has led the government to team up with (foreign) private investors, to invest in various infrastructure projects, including the construction of marinas, hotels, restaurants, golf courses, as well the development of a new casino resort. Overall, the low level of investment in R&I in construction sector suggests that productivity may remain structurally low. This might hamper the competitiveness of the sector in the future. Cyprus ranked last in the EU-28 when it comes to Eco-Innovation. It has, however, done well in terms of investing in new digital technologies, ranking above the EU 28 average. Specifically, in the construction sector, the country has seen high proportion of companies investing in technologies such as 3D printing, drones, augmented and virtual reality and IoT.

The construction sector is expected to continue its growth in the next few years. This is mainly due to an improved economic climate and higher tourism investments. A renewed focus on energy efficiency and infrastructure investments as well as preferences for digital technologies will further support the growth of the broad construction sector.

However, this growth may be threatened by the continued lack of access to finance for construction SMEs and the high reliance on foreign investment in residential, non-residential and civil engineering markets.

Czech Republic

Over the 2010-2019 period, Czech Republic’s GDP increased by 22.6%, totalling CZK 5,182.8 billion (EUR 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.

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.

The total turnover in the broad construction sector increased to EUR 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 (EUR 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 (EUR 29.9 billion) has been dedicated to motorway construction, CZK 878.0 billion (EUR 33.6 billion) for railway modernisation and CZK 769.0 billion (EUR 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 – EUR 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

The Danish economy recorded a relatively strong growth over the past years, reaching DKK 2.3 trillion (EUR 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.

The turnover of the broad construction sector touched EUR 68.4 billion in 2017, which represents a growth of 54.2% over the period 2010-2017. It increased further to EUR 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.

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 EUR 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 (EUR 13.7 million) for initiatives to upskill the low skilled workers .

Estonia

Estonia’s GDP growth remained strong in 2018, increasing by 3.9%, even though it is slightly lower than the 2017 level of 4.9%.

The growth of the Estonian economy was primarily driven by a robust domestic demand and private consumption, which are supported by rising employment and growing wages.

In line with the growth in the economy, the broad construction sector in Estonia has experienced positive results. The volume index of production in the narrow construction sub-sector rose by 49.2% between 2015 and 2018, marking an acceleration of 17.4% over the previous year. Similarly, production in the construction of buildings increased by 18.0%, followed by construction of civil engineering (+16.3%), during the same period.

The increase in production translated in an increase in turnover. Total turnover in the broad construction sector amounted to EUR 10.9 billion in 2018, compared to EUR 4.6 billion in 2010. The narrow construction sub-sector registered the highest share within the sector, accounting for 56.3% of the total turnover in 2018.

Profitability in the sector has also experienced significant increase. This is partly explained by the rising labour productivity and employment prospects in broad construction.

Apparent labour productivity increased by 85.3% in the broad construction between 2010 and 2017. This growth is also reflected in all construction sub-sectors until 2018. For instance, labour productivity in the real estate sub-sector reported an increase of 144.9%, the highest growth among all sub-sectors, followed by the civil engineering sub-sector (+96.1%) and the narrow construction sub-sector (+81.8%) during the period 2010-2018.

The gross operating surplus of the broad construction sector also improved by 211.0% between 2010 and 2017, indicating a rise in the sector profitability.

In parallel, employment in the Estonian broad construction sector recorded a growth of 45.1% for the 2010-2018 period. This was mainly driven by the increase of people employed in the narrow construction sub-sector (+54.0%), followed by the manufacturing sub-sector (+43.0%) and architectural and engineering activities sub-sector (+29.5%) in the same period. At the same time, the number of job vacancies also increased significantly in the same period.

Total investments in broad construction sector increased by 51.8% % between 2010 and 2018. In particular, investments in dwellings increased by 136.8% in the period. In terms of non residential construction, the development has been similar as in the construction of dwellings. Indeed, investment in non-residential construction and civil engineering grew by 25.9% between 2010 and 2018.

Furthermore, house prices have reflected the developments in the overall economy, growing by 15.0% between 2015 and 2018. Due to the rise in demand, the supply of new residential real estate has grown, contributing to containing the upward pressure on house prices.

The civil engineering segment is expected to benefit from investments in transport infrastructure, which are needed to implement the vision of the ‘National Spatial Plan Estonia 2030+’. However, Estonia’s transport investment is heavily reliant on the EU funds, with a planned allocation of EUR 524.8 million of EU funding dedicated to transport over the 2014-2020 programming period. The Rail Baltica project, worth EUR 1.3 billion, plays a strategic role to connect Estonia with Central and Western Europe through a high-speed rail connection. In November 2019, Estonia started the construction under Rail Baltica project. The first structure will be the Saustinõmme viaduct, which will cross the Rail Baltica main line.

Despite favourable economic and investment environments, the Estonian construction sector’s development is experiencing difficulties. Labour and skills shortages are limiting the 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).

Overall, the outlook for the broad Estonian construction sector is positive, mainly driven by non-residential and infrastructure investment i.e. in transport. However, these investments rely on EU funding and public financing. Addressing structural challenges of the sector linked to labour and skill shortages will help in ensure the continuous growth on the long term.

Finland

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

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 EUR 58.4 billion in 2017. Further, in 2019 , it grew to EUR 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.

The gross operating surplus of the broad construction sector reached to EUR 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.

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%.

Number of persons employed in the Finnish broad construction sector

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.

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

Over the 2010-2018 period, the French GDP increased by 10.7%, amounting to EUR 2,312.0 billion in 2018.

The overall business confidence in French economy has also improved driven by stable domestic housing demand amidst falling interest rates and government tax incentives.

The volume index of production in the narrow construction sector increased marginally, by 2.3% over the 2015-2018 period. The production in building construction increased slightly by 1.1%, while civil engineering construction experienced a higher growth of 6.1% over the same period.

Similarly, the total turnover in the broad construction sector increased moderately by 9.9% from EUR 419.9 billion in 2010 to EUR 461.6 billion in 2018. This growth was primarily driven by an increase in turnover in the narrow construction (+15.5%) and manufacturing (+11.5%) sub-sectors over the 2010-2018 period.

During the 2010-2017 period, the apparent labour productivity of the broad construction sector also increased by 10.5%. This growth is reflected in all the construction sub-sectors between 2010 and 2018, particularly in the manufacturing sub-sector (+19.9%), followed by narrow construction sub-sector (+14.6%) for the same period. This increase in labour productivity also supported the marginal increase in profitability of the broad construction sector. Indeed, the gross operating surplus of the broad construction sector also slightly by 1.1% for the 2010-2018 period. However, for companies operating in the residential sector, profitability has been rather stagnating, even though the production volume and turnover have kept on increasing. This is evident from the fact that the total gross operating rate of the broad construction sector declined by 6.2% between 2010 and 2017 .

The total employment in the broad construction sector declined by 2.2% in 2018 compared to the 2010 levels. This was mainly driven by a decrease of 4.3% and 7.0% in number of employees in the narrow construction and manufacturing sub-sectors, respectively for the same time period. This deterioration was partially offset by positive improvements of 4.7% in the real estate activities and 6.5% in architectural and engineering activities sub-sectors.

Since 2015, housing prices have started picking up for existing and new dwelling, reflecting a housing demand increasing faster than the supply. In fact, the issuance of building permits for residential buildings has declined by 4.1% in 2018 compared to 2010. In addition to domestic demand, foreign demand is also contributing to the housing supply shortage, especially in popular tourist locations such as Paris.

In accordance with the Construction Revival Plan, several schemes promoting home-ownership have been introduced (such as the Zero-interest Loan, Social Access loan) and were recently amended to promote to the acquisition of new housing, especially by young people. In September 2017, the new government presented its Investment Plan (Grand Plan d’Investissement) over the following five years. Of the EUR 57.1 billion investment planned, EUR 20.0 billion will be dedicated to the construction sector.

Despite the above favourable developments, the French economy is expected to slow down, which may impact the development of the construction sector. In addition, some key issues, such as labour and skills shortage and the relatively low profitability of the sector, will need to be addressed to ensure the sustainable development of the sector.

Overall, the growth of the broad construction sector is expected to further slowdown in the coming years, due to a weakening economic environment. The sector may even contract post 2021, especially if some of its structural issues are not addressed.

Germany

Despite a challenging external environment, the German economy maintained a solid growth over 2015-2018, driven by a strong domestic demand.

Mirroring this trend, the construction sector also exhibited positive development. The volume index of production of the narrow construction sector registered an overall growth of 9.3% over 2015 2018, a 16.5 index points increase from 2010. In particular the volume index of production in construction of civil engineering sub-sector recorded a 13.1% increase between 2015 and 2018.

Volume index of production in the narrow construction sector between 2015 and 2018 grew by 9.3 percent

As a result, the broad construction sector experienced an increase in total turnover, reaching EUR 575.6 billion in 2018 (+52.5% compared to the 2010 levels). This was mainly driven by the narrow construction sub-sector, which turnover accounted for 49.4% of the total turnover, and increased by 66.4% over the same period. In terms of profitability, however, developments have been less favourable. The broad construction sector’s profit margin on sales only rose by 0.5 percentage point between 2010 and 2017. This may be partly explained by the parallel rise of construction costs and especially the labour costs (+7.9% and 10.4% respectively between 2015 and 2018).

In parallel, employment in the broad construction sector in Germany increased considerably since 2010, growing from 2,938,001 to 3,973,029 in 2018 (+35.2%).

Turnover in the broad construction sector between 2010 and 2018 grew by 52.5 percent

Employment in the broad construction sector between 2010 and 2018 grew by 35.2 percent

The housing market continues to be fuelled by strong demand, owing to rising incomes, low interest rates as well as high level of net migration. In parallel, supply has not kept up with demand for a prolonged period. The combination of the above factors contributed to a continued increase in property prices, in particular in big cities. The house price index recorded a 21.7% increase between 2015 and 2018, a 37.8 index point increase between 2010 and 2018.

House prices index between 2015 and 2018 grew by 21.7 percent

Rising prices have made it more difficult for low and middle income households to afford adequate housing. The rising price has led the German Central Bank to raise concerns about a potential overheating of the German housing market. According to Bundesbank, real estate overvaluations in German towns and cities ranged between 15% and 30% in 2018.

Total investments in the broad construction sector increased by 7.2% over between 2015 and 2018, a 14.7 index point increase between 2010 and 2018. This increase was driven by the housing market, as reflected by the investments in dwellings, which rose by 8.7% between 2015 and 2018. Investments in non-residential constructions also increased, albeit at a slower pace, by 4.9% between 2015 and 2018. Following a long period of low public investments in infrastructures, the federal government took several measures to unlock investments at federal, regional and municipal levels. This includes the announcements of EUR 86 billion investments in the national rail infrastructure, as part of a total funding of EUR 269.6 billion for the 2030 Federal Transport Infrastructure Plan. This will support the infrastructure activities in Germany, which in turn will boost the construction sector growth.

Investments in the broad construction sector between 2015 and 2018 rose by 7.2 percent

Despite government’s efforts and favourable economic conditions, the construction sector still faces some challenges. A rising number of companies is encountering difficulties in filling up vacant positions. This issue, related to skills and labour shortage, will be partly addressed by the Skilled Labour Immigration Act, which will take effect on March 1, 2020. This in turn will facilitate non-EU immigration, as a way to cope with labour shortage.

Overall, the outlook for the German construction sector is strong, driven by a dynamic housing market, improved infrastructure spending and positive developments for all market segments.

Greece

The Greek economy has been growing in past few years, with the 2019 GDP reaching EUR 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.

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 EUR 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 EUR 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 EUR 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.

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 EUR 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 EUR 7.4 billion invested in rail projects and EUR 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

Over the 2010-2018 period, the Hungary’s GDP increased by 24.0%, amounting to HUF 38,976.5 billion (EUR 115.8 billion) in 2018.

The overall business confidence in the Hungarian economy has also improved, on account of increased public infrastructure investment, rising household disposable income, favourable external demand and government schemes, followed by lower interest rates.

The volume index of production in the narrow construction sub sector increased by 27.5% over the 2015-2018 period. This was accompanied by strong performance in the volume index of production of construction of buildings (+40.2%) and civil engineering (+17.8%) over the same period.

Production volume index in the construction of buildings between 2015 and 2018 rose by 40.2 percent

Similarly, the total turnover of the broad construction sector increased by 46.8%, mainly driven by growth in the narrow construction (60.1%), architectural and engineering activities (+48.7%) and manufacturing (+48.3%) sub-sectors over the 2010-2018 period.

Turnover in the broad construction sector between 2010 and 2018 increased by 46.8 percent

At the same time, the apparent labour productivity of the broad construction sector increased by 36.6% between 2010 and 2017. This increase was mirrored in all the construction sub-sectors between 2010 and 2018, particularly the narrow construction sub-sector (+101.2%), followed by the manufacturing (+38.9%) and architectural and engineering activities sub-sectors (+36.7%).

Similarly, the gross operating surplus of the broad construction sector increased by 57.3% over the 2010 2017 period, driven by significant rise in narrow construction (+92.0%), architectural and engineering activities (+86.4%) and manufacturing sub-sectors (+58.3%). In fact, the total gross operating rate of the broad construction sector also rose by 3.6 percentage points between 2010 and 2017.

Total gross operating surplus in the broad construction sector between 2010 and 2017 increased by 57.3 percent

As a result of some of these developments, the total employment in the broad construction sector surged by 9.4% over 2010-2018, primarily driven by increases in the number of employees in the architectural and engineering activities (+21.1%) and narrow construction (+9.7%) sub-sectors.

Housing prices have started picking up rapidly for existing and new dwelling, reflecting a strong domestic housing demand with rising disposable income. This price increase was to some extent mitigated by the increase of housing supply. In fact, the issuance of residential building permits has increased by 85.6% since 2010, reaching 13,743 in 2018. In contrast, the number of non-residential building permits issued has declined by 14.8% from 5,101 in 2010 to 4,346 in 2018.

House price index for total dwellings between 2015 and 2018 increased by 53.3 percent

Number of buildings permits for residential buildings

Number of buildings permits for residential buildings increased by 85.6 percent between 2010 and 2018

The Hungarian government foresees considerable public investments in infrastructure, particularly in transport. In April 2019, the government declared its plans to invest EUR 11.0 billion in road network over the next five years, primarily focusing on the expansion of the motorway network. Apart from 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.

The Hungarian government has already announced its plan to invest HUF 790.0 billion (EUR 2.3 billion) for mainline and urban rail projects under the Integrated Programme for Transport (IKOP).

However, single-bidding and corruption are still serious concerns to be dealt with. Moreover, skill shortages and job-skill mismatch continue to plague the broad construction sector. The government’s decision to revamp the national Vocational Education Training (VET) system towards a simplified dual-education model is expected to rectify the present situation soon.

Overall, the prospects for the Hungarian construction sector are positive, spurred by residential construction, transport and energy infrastructure. Nonetheless, improved EU funds absorption, greater procurement transparency and improved job-skill match are some of the challenges that may hinder its medium to long term growth.

Ireland

The Irish economy has recorded a solid growth in 2018, with the GDP rising annually by 7.5%. This is driven by enhanced employment, private consumption, alongside strong investment in construction. Although forecasts for the sector, as well as for the general economy, remain rather positive, uncertainty persists, linked notably to the outcome of the Brexit negotiations.

The construction sector has become the fastest growing economic activity in Ireland over the past three years. The number of enterprises in the broad construction sector in Ireland reached 95,781 in 2018, 29.6% above the 2010 level. The volume index of production of the narrow construction sub sector increased by 52.5 index points between 2010 and 2018, marking a 47.2% increase from the 2015 levels. As a result, the turnover of the broad construction sector in Ireland amounted to EUR 41.9 billion in 2018, a 54.8% increase, compared to 2010.

In the aftermath of the crisis, investments in the broad construction sector experienced a 44.3% increase between 2015 and 2018, a 54.5 index point increase between 2010 and 2018. Investments in dwellings experienced an increase of 83.8% between 2015 and 2018, a 36.5 index point increase between 2010 and 2018. Investment in non-residential construction and civil engineering, on the other hand, increased more slowly, by 30.0% over the 2015 2018 period. In 2018 , the broad construction sector was estimated to employ 237,548 persons, a 52.2% increase compared to 2010, thus showing a strong recovery from the low levels recorded in 2012 (i.e. 139,555).

The Irish housing market experienced one of the longest and strongest lasting house price increase in the EU 28 . The onset of the crisis led to a housing market crash, with the house price index dropping by 53.0% between 2007 and 2012. It has since then recovered, growing by 31.4% between 2015 and 2018.

According to Central Statistics Office (CSO), new dwelling completions experienced a Year on Year (YoY) increase of 22.0% in third quarter of 2019, compared to the previous year, reaching 5,667 dwellings. The increase was specifically driven by a 81.1% increase in the number of apartment completions during the same period . However, it should be noted that this is coming off a very low base.

Even with this increase in housing supply, there is still a long way to go to satisfy the housing demand. For instance, in terms of social housing, the supply stood at 10,000 homes for a demand amounting to 72,000 in 2019 . To tackle the housing shortage, the government 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 National Asset Management Agency (NAMA) plans to fund the delivery of up to 20,000 new units until 2020.

The need for continued provision of housing will increase in the future, to cater for the estimated 1 million people projected to be living in the country by the year 2040 as forecasted by the National Development Plan Project Ireland.

Despite the strong recovery of the construction sector, the civil engineering segment has not developed at the same pace as other construction activities, partly due to previous fiscal austerity measures. In fact, the Construction Industry Federation of Ireland (CIF) indicate that, in 2018, the commercial and civil construction sector increased by half the rate of the housing sector. However, prospects remain positive with the introduction of the new Project Ireland 2040. The latter plans a total investment of EUR 116 billion for public infrastructure and capital works between 2018 and 2027.

The Irish construction sector suffers from a shortage of skilled labour, requiring an additional 112,000 workers by 2020. This will be a key challenge to address, to ensure the growth of the construction sector. Initiatives including the National Skills Strategy 2025 and Action Plan for Jobs aim at improving and expanding workers’ skills, including digital skills.

The revival of the Irish construction sector, underway since 2013, is expected to continue over the coming years. This will be driven by increasing residential and infrastructural investments planned over the next ten years. Upskilling of the Irish workforce is of paramount importance for the sector to remain competitive.

Italy

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.

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 EUR 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 EUR 18.4 billion. This shows that the sector’s margins are increasingly narrowing.

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.

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.

Number of persons employed in the broad construction sector

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 EUR 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

The Latvian GDP grew by 4.8% during 2018, the highest GDP growth rate since 2010. The growth was driven by consumer spending and strong investment levels supported by EU fund inflows. The construction sector has generally been recovering since 2010, although it experienced additional contractions in 2015 and 2016.

The volume index of production in the broad construction sector increased by 20.6% between 2015 and 2018 after witnessing a major year-on-year (YoY) decline of 16.6% in 2016. Following the increase in production, the turnover of the sector amounted to EUR 9.1 billion in 2018 , 92.9% above the bottom low of 2010. As a result, employment and the number of enterprises in the broad construction sector increased by 51.8% and 67.8% respectively between 2010 and 2018.

The housing market has been on the revival path since 2010, supported by declining mortgage rates (from 3.7% in 2010 to 2.2% in 2018) and greater household purchasing power. This is also reflected by the house price index for total dwellings, which increased by 29.3% between 2015 and 2018, equating to 49.0 index points increase from 2010. This trend is partly driven by the house price index for new existing dwellings, which rose by 30.2% over the 2010-2018 period. In 2018, 1,925 building permits were issued for the construction of new one-dwelling buildings and 1,273 permits for construction, capital repairs reconstruction and restoration of existing one-dwelling houses . The demand for housing has been boosted by introduction of the Housing Guarantee Programme, providing guarantees on mortgages to support the purchase and/or construction and renovation of the first home. The programme also enables families and young professionals get a mortgage against lower down payment than banks would normally require.

Investment priorities for the development and modernisation of Latvia’s transport infrastructure, particularly roads and railways, are defined in the Latvian National Development Plan 2014-2020, the Transport Development Guidelines 2014-2020 and the National Roads Programme 2014-2020.

While the quality of transport infrastructure in Latvia has improved significantly, the quality of road infrastructure remains well below EU-28 average. Accordingly, Latvia’s 2019 budgetary plan dedicated a total of EUR 236.1 million towards road construction and maintenance. Currently Latvia also lags behind in the completion of the major Rail Baltica project and that of the conventional TEN-T rail core network, leading to an extension of the deadline of completion of the project to 2026. Additionally, the agencies estimate an additional investment of around EUR 1.67 billion for completion of the project in Latvia.

In terms of workforce, the Latvian construction sector is facing a shortage of skilled workers, especially construction managers, water and wastewater engineers and roofers. Additionally, persisting corruption risks in the Latvian construction sector act as a barrier to its development. Last, delays in the absorption of EU funds and the deferral and concentration of large infrastructure projects over 2018-2020 may increase risks of a construction “bubble”. This may in turn lead to price increases and affect quality of the construction works.

The outlook for Latvian construction sector is positive in the short to medium term, driven by EU fund inflows and domestic consumption. However, the sector faces challenges in terms of availability of skilled workforce and lack of effective implementation of various projects. The country’s over-reliance on EU funds, informal employment, and lack of access to finance continue to act as a deterrent for potential new investors.

Lithuania

Over the 2010-2018 period, the Lithuanian GDP increased by 32.7%, amounting to EUR 37.2 billion in 2018.

In line with the overall economic growth, the business confidence of Lithuanian construction sector has improved in 2010-2018. This improvement was driven by strong domestic housing demand, rising house prices, falling interest rates and government-backed development initiatives.

The overall production in the Lithuanian broad construction sector increased by 12.6% over the 2015-2018 period, mainly driven by the growth in the housing market. In fact, the production of the construction of buildings grew by 13.2% over the same period, while the production in the civil engineering segment experienced a slightly lower growth of 11.7%.

Similarly, the number of people employed in the broad construction sector increased by 58.0% between 2010 and 2018, with real estate activities sub-sector recording the largest increase of 64.4%, followed by narrow construction (+64.2%), manufacturing (+40.4%) and architectural and engineering sub-sectors (+34.0%).

The total turnover of the broad construction sector increased significantly over the 2010-2018 period (+121.9%), with the narrow construction, manufacturing and real estate activities sub-sectors growing by 132.3%, 132.0% and 95.6% respectively.

The increased production and turnover were achieved, among other, due to the increased productivity. During 2010-2017, the apparent labour productivity of the broad construction sector increased by 67.0%, with the manufacturing sub-sector demonstrating the largest development. The gross operating surplus of the broad construction sector also improved significantly over 2010-2017 from EUR 482 million to EUR 1.2 billion, indicating a rise in the sector’s profitability.

The increase in house prices is expected to continue in 2020, supported by rising disposable income and lower mortgage rates.

Despite diminished growth in housing investment, there has been a consistent growth in house prices, especially in major cities including Vilnius, Kaunas and Klaipeda.

With social housing options being limited, affordable housing has become a key issue for housing policy. To address it, the government has introduced the Municipal Social Housing Development Action Plan 2015-2020 to support the construction and renovation of social housing units. Additionally, the Law on Housing Acquisition or Lease Support (2018) allows municipalities to sublet housing to people with low income.

Despite the decline over the 2010-2017 period, Lithuania is expected to receive a boost in infrastructure investment, especially in the transport and energy sectors with dedicated funding from the EU.

While the flow of EU structural funds remained stable, it is expected to increase in 2020, providing potential fresh opportunities for the construction sector. The EIB and the European Commission will emerge as the key players and tools for financing Lithuania’s infrastructures. This is particularly significant regarding transport and energy infrastructures, with EU supporting the expansion of rail networks (e.g. Rail Baltica project) together with modernization of airports (in Vilnius, Kaunas and Klaipeda), development of trade corridors and electricity market by connecting Lithuania’s grid with the EU network.
Lastly, the construction sector still faces challenges in the form of skills mismatch and labour shortages. Participation in adult learning has declined along with a similar decrease in the number of tertiary students in engineering, manufacturing and construction. Lack of professional trained workforce and rise in work-related immigration are also some of the issues hindering the growth of Lithuanian construction sector.

Overall, the outlook for the broad Lithuanian construction sector is positive, particularly for the residential, non-residential and the infrastructure construction. However, the infrastructure investment is dependent on EU funding and other public sector initiatives. Timely completion of existing projects along with effective tackling of challenges of labour shortages will help in realising the full potential of the construction sector.

Luxembourg

The GDP of Luxembourg increased by 2.6% in 2018 compared to 2017, primarily driven by strong domestic consumption.

In line with the country’s overall economic growth, the broad construction sector in Luxembourg has experienced positive results. Specifically, the number of enterprises in the broad construction sector increased by 20.8% between 2010 and 2018. This increase was mainly driven by the growth of the number companies in the narrow construction 26.9%), architectural and engineering activities (18.5%) followed by real estate activities (15.5%) sub-sectors. In parallel, the volume index of production in the narrow construction sub sector also increased by 8.5% between 2015 and 2018.

Production in the narrow construction sub sector between 2015 and 2018 grew by 8.5 percent

The increase in production translated in an increase in turnover. Total turnover in the broad construction sector increased by 46.1%, going from EUR 7.7 billion in 2010 to EUR 11.2 billion in 2018. The narrow construction sub-sector registered the highest share within the sector, accounting for 73.8% of the total turnover in 2018.

Total turnover of the broad construction between 2010 and 2018 grew by 46.1 percent

During the 2010-2018 period, the apparent labour productivity of the broad construction sector fluctuated. However, it increased in the narrow construction, manufacturing and architectural and engineering sub-sectors by 24.4%, 8.4% and 12.4% respectively. The gross operating surplus of the broad construction sector also improved by 36.4% in the period 2010-2016, indicating a rise in the sector profitability.

Profitability in the broad construction sector in Luxembourg

Profitability in the broad construction sector in Luxembourg between 2010 and 2016 grew by 36.4 percent

In parallel, employment in the Luxembourgish broad construction sector recorded a significant growth of 23.7% for the 2010-2018 period. During this period, the narrow construction sub-sector experienced the highest increase in terms of people employed (+25.1%), followed by the architectural and engineering activities sub-sector (+24.0%). Despite the growing employment, the number of vacancies in the narrow construction sub-sector increased substantially between 2010 and 2018 (+248.3%).

Number of job vacancies in narrow construction sub-sector between 2010 and 2018 increased by 248.3 percent

The total investment in the broad construction sector grew by 25.0% in 2018 compared to 2010. In particular, investment in dwellings by the whole economy increased by a greater extent in the same period (+50.3%). This is mainly driven by rising investments in public infrastructure projects and non-residential buildings.

Total investment in the broad construction sector between 2010 and 2018 grew by 25 percent

The housing market witnessed a significant increase in terms of the demand, fuelled by record-low mortgage rates and rising household incomes. In May 2018, Luxembourg also initiated adoption of urban planning laws whereby it increased the housing dedicated areas by 13.0%. The country also plans to raise this share for social housing from 10% to 30%. However, despite a considerable increase in building permits for residential dwellings (+37.3%) between 2015 and 2018, supply is still lagging behind.

Building permits for residential dwellings between 2015 and 2018 grew by 37.3 percent

According to STATEC (the national institute of statistics) forecasts, Luxembourg needs to build an additional 5,600 to 7,500 housing units every year until 2060 to keep up with the increasing demand for households. Furthermore, rented housing in the country is mostly concentrated around Luxembourg City and it is becoming increasingly expensive, mainly for lower income households.

To alleviate the housing cost burden, the government, in 2018, extended the “rent subsidy” which was introduced in 2016.

House prices have also increased steadily, going up by 19.9% between 2015 and 2018 (21.0% for existing dwelling and 17.7% for new dwellings). To foster construction and improve housing affordability, the government is taking several initiatives, including subsidies to invest in social infrastructure for local governments with a predicted population growth of over 1% per year (or 15% over a 10-year period). In the context of innovation, Luxembourg has a strong innovation profile and boasts a number of construction-related clusters and initiatives, such as the Resource Centre for Technologies and Innovation in Construction and NEOBUILD dedicated to research and development in sustainable construction. In addition, the Luxembourg Institute of Science and Technology (LIST) is active in the promotion of Building Information Modelling (BIM).

Despite the government’s measures and favourable economic conditions, the Luxembourgish construction sector growth is still limited due to shortage of professional and skilled labour. A rising number of companies have encountered difficulties in filling up vacant positions. The persisting skills shortage is being addressed through several new initiatives, notably LuxBuild2020 II.

Overall, the outlook for the broad construction sector is positive, driven by a booming housing market and positive developments for all market segments.

Malta

The overall Gross Domestic Product (GDP) of Malta amounted to EUR 10.4 billion in 2018, marking a 57.0% increase since 2010.

The broad construction sector is amongst the main drivers of the Maltese economy in terms of GDP, totalling 7,167 enterprises in 2018, 6.8% above the 2010 levels.

In line with GDP growth, the volume index of production of the narrow construction sub sector also increased by 26.7% for the period 2015 to 2018. As a result, the turnover of the broad construction sector also increased, reaching EUR 2.0 billion in 2018, thus marking an increase by 76.5% from 2010.

Turnover of the broad construction sector between 2010 and 2018 grew by 76.5 percent

Additionally, the construction cost index rose by 5.1% between 2015 and 2018, mainly due to an increase in labour costs by 5.4% and increase in input prices for materials by 5.0%. However, this did not have a strong impact on the profitability. The gross operating rate of the narrow construction and architectural and engineering activities increased between 2010 and 2017 by 3.0 and 0.4 percentage points.

In turn, the number of people employed in the broad construction sector increased by 21.5% between 2010 and 2018. Although the number of people employed in the narrow construction sub sector grew by 11.0% between 2010 and 2018 (which is less than other broad construction sub sectors), it accounted for 70.9% of the number of people employed in the broad construction sector in 2018.

Number of people employed in the Maltese broad construction sector

Number of people employed in the broad construction sector increased by 21.5% between 2010 and 2018

The house prices in the Maltese property market continue to upsurge. The house price index has experienced a strong rise, growing by 17.5% between 2015 and 2018. This price increase is partly driven by the growing housing demand, which is boosted by low interest rates on mortgages, strong immigration flows, surging demand for tourist accommodation and growing disposable. Government schemes, such as the Individual Investor Programme and the stamp duty exemption for first-time buyers, are also spurring demand for residential properties.

House price index between 2015 and 2018 increased by 17.5 percent

To meet the growing demand, supply is also improving, as reflected in the number of building permits (Residential buildings, except residences for communities). These increased by 226.5% between 2015 and 2018. The investment in construction amounted to EUR 1.2 billion in 2018, out of which EUR 636 million were invested in dwellings and EUR 568 million were spent on non-residential construction and civil engineering.

Number of building permits between 2015 and 2018 increased by 226.5 percent

Nonetheless, the sharp rise of the housing price brought forward the issue of affordability and access to housing for the population in Malta. To address this issue, the Housing Authority will be pursuing a EUR 50.0 million investment plan over 2016-2020 for the construction of 640 new social housing units and associated infrastructures.

Another priority of the government relates to improving the transport network, especially regarding road infrastructure. The Global competitiveness Report 2019 ranked Malta 115th out of 141 countries in terms of road connectivity and 106th in terms of quality of roads.

The National Transport Strategy 2050 and the operational Transport Master Plan 2025 were launched, thereby to make an improvement in the road conditions.

The implementation of the Master Plan will require an estimated investment of EUR 231 million starting from 2016 till 2020 and additional EUR 397 million for 2021 till 2025. In 2019, the Maltese government planned an investment of EUR 64 million for 14 projects to improve the sustainability, efficiency and safety in Malta’s arterial road network. These investments also aim to reduce the travelling time and decrease air and noise pollution.

The Maltese construction sector has performed fairly well in 2018, and is expected to do so in the years to come, boosted by investments in dwellings and infrastructure. However, the country’s labour and skills shortage may result in adverse impact. To tackle this issue, the government has developed several initiatives including attracting foreign workers, strengthening the education/training system, increasing female participation in the workforce.

Netherlands

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

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 EUR 155.7 billion, a 14.1% increase compared to 2010. It further increased to EUR 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.

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 EUR 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

In 2019, Poland’s GDP amounted to PLN 2,136.2 billion (EUR 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.

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.

In parallel the construction of buildings and construction of civil engineering also experienced significant growth of 33.5% and 11.8% respectively between 2015 and 2019.

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

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 EUR 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.

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.

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

In October 2019, the EU introduced plans to invest more than EUR 880 million (EUR 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

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

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.

Number of enterprises in the broad construction sector in Portugal


 
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 EUR 36.2 billion, representing a decline of 29.1% compared to 2010 (EUR 51.1 billion). It further increased to EUR 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.

Similarly, the gross operating surplus in the broad construction sector declined by 15.9% during 2010 2017, reaching EUR 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%.

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 EUR 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 EUR 22.0 billion into the areas of transport, energy and environment projects. In addition, Portugal is planning to invest EUR 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

Over the 2010-2018 period, the Romanian GDP increased by 35.1%, amounting to RON 831.5 billion (EUR 173.8 billion) in 2018.

The overall business confidence in the Romanian economy improved over 2010-2018, on account of increased public infrastructure investment, rising household disposable income, favourable government schemes and lower interest rates.

The volume index of production of Romanian broad construction sector generally declined over the 2015-2018 period, mostly due to the weak performance of the production of civil engineering ( 23.8%).

Production volume index in the civil engineering construction between 2015 and 2018 decreased by 23.8 percent

In parallel, the total turnover in the broad construction sector increased by 24.6% between 2010 and 2018, mainly driven by growth in real estate activities (+69.0%), architectural and engineering activities (+46.1%) and manufacturing sub-sectors (+42.2%).

Turnover in the broad construction sector between 2010 and 2018 increased by 24.6 percent

At the same time, the apparent labour productivity of the broad construction sector decreased by 6.2% between 2010 and 2017. This growth is reflected in all the construction sub-sectors. These experienced substantial growth over the 2010-2018 period, particularly the architectural and engineering activities sub sector (+50.1%) followed by the real estate activities sub sector (+40.8%). In contrast, the gross operating surplus of the broad construction sector decreased by 35.8% over 2010 2017, predominantly due to a fall in the narrow construction sub-sector ( 27.8%) and manufacturing sub-sector (-17.1%). In turn, the total gross operating rate of the broad construction sector also declined by 7.6 percentage points, standing at 11.5% in 2018 (compared to 19.1% in 2010).

Total gross operating rate in the broad construction sector between 2010 and 2017 in percentage points decreased by 7.6 percent

Similarly, the total employment in the broad construction sector also declined by 5.7% over the 2010-2018 period, mainly due to decreases in number of employees in the narrow construction ( 9.2%) and manufacturing ( 5.7%) sub-sectors. This deterioration was partially off-set by positive improvements in the real estate activities (+11.5%) and architectural and engineering activities (+6.8%) sub-sectors.

Since 2015, housing prices have started picking up (+18.6%) for existing and new dwelling, reflecting a strong domestic housing demand. The issuance of residential building permits has increased by 1.2% compared to 2010, reaching 42,694 in 2018. In particular, the number of permits for two or more dwelling buildings has increased substantially (+173.4%) between 2010 and 2018.

House price index for total dwellings between 2015 and 2018 increased by 18.6 percent

Number of buildings permits for two or more dwelling buildings

Number of buildings permits for two or more dwelling buildings increased by 173.4 percent between 2010 and 2018

Romania had one of the highest overcrowding (46.3%) and severe housing deprivation rates (16.1%) in the EU in 2018. These indicators are significantly above the EU-28 average of 15.5% and 4.0% respectively, highlighting relatively poor housing conditions.

To improve the housing market situation, the Romanian government introduced several investment schemes to support the market. The First Home Programme, with a budget of RON 2.0 billion (EUR 418.0 million) for 2018, provides state guarantees of up to 50.0% of the value of the mortgage. Furthermore, the National Housing Agency is implementing several affordable home programmes, including the Rental Housing Units for Young People and the Mortgage-financed Dwellings Programme.

Over the past years, the decline in public spending on infrastructure projects has severely affected the quality of the existing infrastructure stock, especially regarding roads and highways. This issue was further aggravated due to Romania’s poor absorption rate of EU funds and public procurement practices. Nonetheless, significant investment activities have been planned under the General Master Plan for Transport, detailing strategic interventions in transport infrastructure up until 2030, amounting to EUR 43.5 billion (with EUR 27.1 billion for road and EUR 10.2 billion for railway projects). In addition, Romania also benefits from EUR 9.5 billion from the EU Regional Funds under the 2014‑2020 Large Infrastructure Operational Programme (LIOP), to be invested in transport, environment and energy projects.

However, the construction sector is facing substantial labour shortage, particularly for insulation and thermal rehabilitation, with around 50,000 workers needed by the end of 2020 to satisfy this demand. To this end, both public and private training initiatives including dual-VET programmes and improved adult lifetime learning courses has been introduced to upskill the workforce.

Going forward, public infrastructure and residential construction are expected to drive the expansion of the Romanian construction sector, with the broad construction sector turnover expected to rise by 10.6% over the 2018-2020 period. Nonetheless, improved EU funds absorption, better project management, greater public procurement transparency and improved political stability are essential for the development of the sector at large.

Slovenia

Since 2010, Slovenia’s GDP has increased by 17.7%, amounting to EUR 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.

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 EUR 8.8 billion in 2017, representing a decline of 10.3% compared to 2010
(EUR 9.8 billion). It further increased to EUR 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.

Similarly, the gross operating surplus of the broad construction sector recorded a significant increase of 49.7% between 2010 and 2017, reaching EUR 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.

Slovakia

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 EUR 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.

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.

The total turnover in the broad construction sector stood at EUR 18.6 billion in 2017, representing an increase of 26.6% compared to 2010 (EUR 14.7 billion). In 2019, it increased to EUR 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 EUR 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.

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 EUR 20.0 million to support housing for 2020-2022. This is 50% less as compared to the 2019 allocation (EUR 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.

Spain

The Spanish economy recorded a strong growth in 2018, even though it marked a slight slow-down in comparison to previous years. In 2018, the country’s GDP grew by 2.4%, a slight decrease from 2.9% in the previous year.

Mirroring the trends of the overall economy, the broad construction sector in Spain also gained momentum. The volume index of production in the narrow construction sub-sector increased by 6.0% between 2015 and 2018. Likewise, the volume index of production in the construction of civil engineering and the construction of buildings grew by 12.3% and 5.3% over the time period.

Volume production in the construction of civil engineering between 2015 and 2018 increased by 12.3 percent

Even though the turnover of the broad construction experienced a 41.8% decline between 2010 and 2014, it increased continuously until 2018, reflecting the growth of volume index of production. However, the turnover of the broad construction sector reported a decline of 18.3% between 2010 and 2018, reaching EUR 226.5 billion. This decline was mainly due to a 27.9% and 7.3% decrease in the turnover of the narrow construction and manufacturing sub-sectors. In contrast, the turnover of the real estate activities and architectural and engineering sub-sectors increased by 35.4% and 0.5% respectively in the same period. However, the turnover of the broad construction sector has continuously increased since 2013, when it reached its bottom low of EUR 155.3 billion.

Turnover of the broad construction sector between 2010 and 2018 decreased by 18.3 percent

In parallel, the profitability in the sector has also experienced a decline between 2010 and 2017. While the gross operating rate of the broad construction sector increased from 13.0% to 14.0%, three out of four sub sectors experienced a decline (the narrow construction, real estate activities and architectural and engineering activities sub sectors), thus indicating lower profit margins.

This may be partly explained by two factors: the decline observed in the apparent labour productivity and the increase of construction costs (and especially input material cost). Between 2010 and 2018, the apparent labour productivity across the narrow construction and real estate sub-sectors declined by 13.3% and 11.1% respectively. In parallel, input materials cost increased by 7.3% between 2015 and 2018.

Apparent labour productivity in the narrow construction sub sector between 2010 and 2018 decreased by 13.3 percent

Employment in the Spanish broad construction sector recorded a decline of 15.7% over the 2010 2018 period. This fall was mainly due to decline in the employment across all the sub sectors except for the real estate activities sub-sector, which experienced a 39.7% increase between 2010 and 2018. Employment in the manufacturing, narrow construction and architectural and engineering activities sub-sectors decreased by 23.7%, 22.9% and 4.5% respectively, over the same time period.

Employment in the broad construction sector between 2010 and 2018 decreased by 15.7 percent

The investment index in the broad construction sector has experienced a steady growth since 2015, rising by 14.7% over the 2015-2018 period. The growth was mainly driven by investments in dwellings. The latter rose by 30.8% between 2015 and 2018, in line with the high demand for housing. Investment in non-residential buildings and civil engineering remained rather stable, growing by 0.4% over the same period, due to the ongoing commitment to fiscal deficit reduction.

Total investment in the broad construction sector between 2015 and 2018 increased by 14.7 percent

The housing market is driving the growth of the construction sector. The house price index for total dwellings has increased by 18.6% between 2015 and 2018. This was mainly driven by a 20.1% rise in the price of new dwellings and an 18.3% growth in the price of existing dwellings. Also, the demand for housing is expected to increase in the years to come, and the need for additional housing has been estimated at 140,000 annually until 2024.

In addition, the government has taken several actions to address the housing shortage and the issue of affordability and renting. In March 2018, the Spanish government approved the new State Housing Plan for the period 2018-2021.

House prices index between 2015 and 2018 increased by 18.6 percent

While the sector’s prospects are positive, 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.

Overall, the outlook for the broad Spanish construction sector is positive, mainly driven by the housing market. Tackling challenges such as labour and skill shortages will help realising the full potential of the construction sector.

Sweden

The Swedish economy exhibited strong growth over recent years, primarily driven by the strong domestic demand. The country’s GDP grew by 2.1% in 2018, a slight decrease from 2.2% in the previous year. The country’s domestic consumption has benefited from the continued favourable monetary policy and rising employment.

Mirroring the overall economy, the broad construction sector in Sweden also gained momentum. Between 2015 and 2018, the volume index of production in the narrow construction sub sector increased by 7.6%. It was primarily driven by the increase in the volume index of production in the construction of buildings (+8.5%) during the period, while the volume index of production in construction of civil engineering experienced a decline of 7.6%.

The acceleration in production resulted into a significant rise in turnover. Total turnover in the broad construction sector reached EUR 137.0 billion in 2018 from EUR 95.1 billion in 2010, marking a 44.1% increase during the period. The narrow construction sub-sector registered the highest share within the sector, accounting for 58.0% of the total turnover in 2018.

Moreover, the profitability in the sector has also experienced increases. This is reflected in the rising labour productivity. Between 2010 and 2017, the apparent labour productivity in the broad construction sector increased by 20.2%. Labour productivity across all construction sub-sectors displayed a similar trend between 2010 and 2018. Similarly, the gross operating surplus of the broad construction sector improved, indicating a rise in the sector’s profitability. It recorded an acceleration of 55.0% between 2010 and 2017, reaching EUR 24.3 billion.

In parallel, employment in the Swedish broad construction sector recorded a significant growth of 27.4% over the 2010-2018 period. This was mainly driven by the increase in terms of people employed in the architectural and engineering activities sub sector (+34.9%), followed by the narrow construction (+31.1%), real estate activities (+14.9%) and manufacturing (+7.2%) sub sectors in the same period.

The investment index in the broad construction sector experienced a steady growth since 2015, rising by 15.7% over 2015-2018. This was primarily driven by the investment in dwellings. In line with the high demand for housing, it recorded an acceleration of 15.1% between 2015 and 2018. Investment in non-residential buildings and civil engineering increased at a higher pace, by 16.6% over the same period.

The house price index for total dwellings has increased by 14.4% between 2015 and 2018. However, it slightly declined by 1.0% in 2018 in comparison to 2017. The rise in house price is partly driven by a combination of structural bottlenecks to housing supply, especially in the main urban areas, combined with favourable tax treatment of home ownership and mortgage debt.

The Swedish government is actively investing in the civil engineering sector. In particular, the transport network was the focus of investment under the 2014-2025 national transport plan, which had a budget of SEK 522 billion (EUR 52 billion). Further in June 2018, the government adopted the national plan for infrastructure 2018-2029, involving a total investment of SEK 700 billion (EUR 67.0 billion). These long-term plans also help ensuring more predictable developments in the civil engineering sector, which construction companies can exploit and prepare for.

Despite favourable economic and investment environments, the Swedish construction sector’s development is experiencing difficulties. Labour and skills shortages are limiting the production and putting a strain on profit margins, as wages are pressured upwards. Moreover, bottleneck vacancies in construction persist in posing a barrier to growth, especially regarding white collars type of professions (site managers, civil engineers and technicians).

Overall, the outlook for the broad Swedish construction sector is positive, mainly driven by non-residential and the infrastructure i.e. transport. But this is mainly dependent on EU funding and national public sector initiatives. Tackling challenges such as labour and skill shortages will help realising the full potential of the construction sector.

United Kingdom

Since 2010, the United Kingdom (UK) GDP grew at an average rate of 1.9%, amounting to GBP 2,045.7 billion (EUR 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.

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.

The total turnover in the broad construction sector stood at EUR 450.1 billion in 2017, representing an increase of 32.9% compared to 2010 (EUR 338.7 billion). It further increased to EUR 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 EUR 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 (EUR 552.6 million) in 2018 to the Housing Infrastructure Fund, which is now worth GBP 5.5 billion (EUR 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 (EUR 1.11 billion) of lending to SME house builders through its new scheme.

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 (EUR 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.

Analytical reports

Analytical reports are documents providing the EU with a wide analysis of the socio-economic and environmental performance of the construction sector and recommendations for possible strategies to increase the sector's competitiveness.

Trend papers

Trend papers are analytical reports that describe specific aspects of the main trends in the construction sector. The reports also contain relevant good practice examples from a policy and industry perspective.

Policy measure factsheets

ECSO identifies and analyses specific policy measures that are being implemented in each EU country to stimulate construction sector employment, growth and opportunities. These are shown in the policy measure fact sheets, organised by thematic objective below.

Thematic objective 1

Austria

Belgium

Bulgaria

Croatia

Cyprus

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Latvia

Lithuania

Luxembourg

Malta

Netherlands

Poland

Portugal

Romania

Slovakia

Slovenia

Spain

Sweden

United Kingdom

Thematic objective 2

Austria

Belgium

Bulgaria

Croatia

Cyprus

Denmark

Estonia

France

Finland

Germany

Greece

Hungary

Ireland

Latvia

Lithuania

Luxembourg

Malta

Netherlands

Poland

Portugal

Romania

Slovakia

Spain

Sweden

United Kingdom

Thematic objective 3

Austria

Belgium

Bulgaria

Croatia

Cyprus

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Italy

Lithuania

Luxembourg

Malta

Netherlands

Poland

Portugal

Romania

Slovakia

Slovenia

Spain

Sweden

United Kingdom

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Contact

grow-construction@ec.europa.eu