EUROPEAN UNION

Overall construction activity

The Covid pandemic provoked an unprecedented economic crisis with EU GDP contracting by 6.3% in 2020. Restrictive measures applied by national authorities to contain the spread of the COVID-19 virus inevitably caused an economic contraction and hit a large number of businesses. The measures led to physical constraints on economic activity and a sudden stop of production. This contraction was aggravated by restrictions on the Single Market.

The construction sector was particularly hit in the second quarter of 2020. In Italy, Spain, Ireland, Slovakia and France construction activities came more or less completely to halt. Where companies were allowed to operate, companies had to face a number of difficulties:

• Labour shortages, either related to workers being in quarantine or to travel restrictions within the EU or within a single country. According to the European Commission, the number of postings dropped dramatically in the second half of March and in April and May.
• Disruption of supply chains leading to a lack of construction materials at some points.
• A lack of protective equipment for workers preventing construction from resuming.
• Additional costs due to putting in place safety and health measures.

Overall, in the second quarter of 2020, value added in construction went down by about 2% compared to the second quarter of 2019. In May, the confidence indicator stood at its lowest level in 2020.

The lockdown hit all economic sectors but divergences started to emerge during summer with some sectors recovering more rapidly than others. With countries lifting restrictions and health and safety protocols having been put in place, work on construction sites had resumed and construction companies maintained their production capacity throughout the year, benefitting from well-filled order books.

Overall, construction suffered less than initially expected in summer 2020, when FIEC forecasted a decline in investment of 8.5%. Total investment in construction declined by 5.8% in 2020 and amounted to €1.4 trillion, which equals 10.7% of EU GDP. While countries like Germany, Portugal, Denmark and Greece showed positive growth rates, the decrease was particularly dramatic in Spain, France, Italy, Czech Republic and Poland. In terms of employment, the sector employed 12.8 million workers in 2020, a slight increase of 0.8% compared to 2019, in spite of a reduction in hours worked of almost 5%.

In 2021, investment in construction is expected to resume growth at a rate of 4.2%. All segments are expected to recover. Except for Finland, the Netherlands and Sweden, all countries are expected to get back on track. But investment will not reach the pre-crisis level from 2019. For employment in construction, a slight decline of 0.1% is projected with the impact of the crisis being postponed to 2021 for some countries.

Housebuilding

Investment in renovation represents almost 30% of total investment in construction. Having proven to be the least volatile segment over the last decade and having served as a stabiliser in the aftermath of the financial crisis from 2009, investment in renovation works declined by 3.7% in 2020 – a historical decrease albeit lower than in other segments. The most affected countries  were Spain, France, Italy and Poland while the evolution was positive in Germany, Portugal, Sweden and the Netherlands.

On the bright side, investment in renovation is expected to bounce back strongly and will even exceed the pre-crisis level by growing at rate of 5.7% in 2021. This is very much due to the fact that Member States put renovation measures at the centre of their recovery programmes. In fact, renovation of energy inefficient buildings is one of the flagships of the EU’s Recovery and Resilience Fund.

In the longer term, this segment has the potential of becoming an even more substantial driver of growth for the construction sector as the renovation of buildings is being put at the heart of European and national climate policies, in particular through the Renovation Wave, presented by the European Commission in October 2020.  According to the European Commission, additional annual investments of €275 billion are needed to renovate and decarbonise the existing building stock which could lead to the creation of 160,000 new jobs.

Rehabilitation and maintenance

Investment in renovation represents almost 30% of total investment in construction. Having proven to be the least volatile segment over the last decade and having served as a stabiliser in the aftermath of the financial crisis from 2009, investment in renovation works declined by 3.7% in 2020 – a historical decrease albeit lower than in other segments. The most affected countries  were Spain, France, Italy and Poland while the evolution was positive in Germany, Portugal, Sweden and the Netherlands.

On the bright side, investment in renovation is expected to bounce back strongly and will even exceed the pre-crisis level by growing at rate of 5.7% in 2021. This is very much due to the fact that Member States put renovation measures at the centre of their recovery programmes. In fact, renovation of energy inefficient buildings is one of the flagships of the EU’s Recovery and Resilience Fund.

In the longer term, this segment has the potential of becoming an even more substantial driver of growth for the construction sector as the renovation of buildings is being put at the heart of European and national climate policies, in particular through the Renovation Wave, presented by the European Commission in October 2020.  According to the European Commission, additional annual investments of €275 billion are needed to renovate and decarbonise the existing building stock which could lead to the creation of 160,000 new jobs.