EMCC European Monitoring Centre on Change

Restructuring in the construction sector

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  • Observatory: EMCC
  • Topic:
  • Restructuring,
  • Labour market change,
  • Business,
  • Date of Publication: 23 August 2009



About
Author:
Terry Ward and Duncan Coughtrie
Institution:

As one of the largest sectors of economic activity in Europe, construction has been hit hard by the onset of the economic recession. This report reviews recent developments in the construction sector in the majority of EU27 Member States – except France, Hungary and the Netherlands – as well as Norway. It looks at how the sector is being affected by the downturn in each country, and how companies and governments have responded. The study reveals that certain parts of the construction sector – such as housing construction – have been more significantly affected than others. Moreover, in many countries, manufacturers of building materials for the sector have also experienced a decline in output.

Introduction

This report from the European Restructuring Monitor (ERM) aims to examine recent developments in the construction sector in different European countries. It highlights the way in which the sector is being affected by the current downturn in economic activity in many of the countries, and how companies have responded to the crisis. The study also reviews the measures being taken by governments to alleviate the consequences of the downturn on both companies and workers. This includes not only measures targeting the construction sector itself but also the more general policies adopted to combat economic recession, which because of their nature are likely to affect the construction sector more than other sectors of the economy.

Construction is one of the largest sectors of activity in Europe and has been hit hard by the onset of the current economic global recession. However, the scale of the impact of the economic crisis and the timing of any downturn vary markedly between countries. In the majority of countries, signs of a downturn in production and employment were already evident by the second half of 2008. In other countries, although the downturn was not evident in the figures up until the end of 2008, there were signs of a future decline. Particular parts of the construction sector – such as housing construction – have been hit more than others. In many countries, in addition, manufacturers of building materials for the sector have also experienced a decline in output.

As there is a lapse of time between output declining and jobs being cut, the full effects of the downturn are yet to be seen. Nevertheless, in some countries, particularly in Ireland and Spain, the number of workers employed had already fallen markedly by the end of 2008. Many of those concerned seem to have been temporary workers whose fixed-term employment contracts have not been renewed or temporary agency workers. At the same time, some companies in certain countries have attempted to safeguard jobs as best they can through temporary layoffs, reduced working hours or wage cuts to reduce the cost of keeping people in employment.

Governments across Europe have adopted a range of measures to boost demand in the economy, many of which have involved public investment and which have thus helped to counter the reduction in new orders. However, these measures have mainly assisted the civil engineering part of the industry.

The study is based on responses to a questionnaire covering recent developments in the construction sector and the action taken by both companies and governments as a result of the global economic recession. The information compiled for each of the European countries covered in the study – the majority of the EU27, except France, Hungary and the Netherlands from which no questionnaire was received, and Norway – is supplemented by data from the European Labour Force Survey (LFS) on the characteristics of those employed in the construction sector and from Eurostat’s Structural Business Statistics on the size distribution of companies, as well as by quarterly national accounts data on production and employment in the industry up to the end of 2008.

The study is divided into two main parts. The first part begins by summarising the characteristics of the sector in terms of the nature of the workforce and the sizes of companies operating in the sector. As well as providing background information against which recent developments can be assessed, it also helps to identify the types of workers affected by job cuts in the sector. The study then reviews the data available up to the end of 2008 in order to indicate how the construction sector was affected by the initial stages of the economic recession in the countries in which this occurred first and to determine how much evidence exists of the downturn in the sector spreading to other countries. Finally, it summarises the policies adopted by companies in the sector as well as by governments across Europe in response to the downturn.

The second part of the study contains summaries of each of the country reports received in response to the questionnaire on which the first part of the study is largely based.

 

 

Employment in the construction sector

The construction sector accounted for just over 8% of employment in the EU and Norway in 2007 (Table 1). The number employed in the sector increased in relative terms between 2004 and 2007, having remained at about 7.5% of total employment over the preceding four years of relatively slow growth of the EU economy.









Table 1: Employment in construction as a proportion of total employment, 2000–2007 (%)

Country

2000

2001

2002

2003

2004

2005

2006

2007

AT

8.4

8.4

8.2

8.3

7.3

8.2

8.2

8.2

BE

6.1

6.5

6.5

6.4

6.5

6.5

6.9

6.9

BG

5.8

4.9

5.2

5.4

5.6

6.4

7.4

9.0

CY

9.8

9.8

9.9

10.7

11.4

11.6

11.2

11.8

CZ

9.3

9.1

8.9

9.4

9.1

9.6

9.0

9.1

DK

6.7

6.6

6.5

6.6

7.0

7.0

7.2

7.0

DE

8.5

8.0

7.6

7.2

7.0

6.6

6.6

6.6

EE

7.8

7.2

5.9

6.6

7.1

8.0

9.7

12.3

EL

7.2

7.5

7.6

8.1

8.1

8.3

8.1

8.7

ES

11.0

11.7

12.0

12.3

12.5

12.4

12.9

13.3

FI

6.5

6.0

6.3

6.6

6.3

6.6

6.6

7.0

FR

6.5

6.4

6.5

6.5

6.7

6.6

6.8

6.9

HU

7.0

7.2

7.0

7.8

8.0

8.1

8.2

8.4

IE

9.9

10.5

10.3

10.7

11.2

12.6

13.2

13.3

IT

7.6

7.9

7.9

8.3

8.2

8.5

8.3

8.4

LT

5.8

5.8

7.3

7.2

8.4

9.0

9.9

11.1

LU

8.5

9.5

9.1

8.5

8.7

7.9

7.7

8.4

LV

6.0

6.7

6.2

7.6

8.9

8.9

9.6

11.3

MT

7.5

6.6

7.7

7.6

6.6

8.4

8.2

7.5

NL

5.7

6.2

5.9

5.7

5.6

5.9

6.0

6.0

NO

6.4

6.7

6.8

7.0

7.1

7.0

7.1

7.4

PL

7.4

6.7

5.9

5.6

5.4

6.0

6.3

6.9

PT

11.8

11.1

11.9

11.7

10.8

10.8

10.7

11.0

RO

3.7

4.0

4.3

4.5

5.1

5.6

6.0

7.3

SE

5.4

5.4

5.5

5.6

5.7

5.9

6.2

6.4

SI

5.3

6.0

5.9

5.8

5.8

6.0

5.8

6.0

SK

8.0

7.9

8.1

9.0

9.6

9.5

9.8

10.1

UK

7.1

7.2

7.2

7.5

7.8

8.0

8.1

8.2

Total

7.5

7.5

7.5

7.6

7.6

7.8

7.9

8.2

Note: For a full list of country codes, see Annex 2 to this report.

Source: Eurostat, LFS

The importance of the sector in terms of employment in 2007 varied markedly across the EU. For instance, in Ireland and Spain, employment in construction accounted for over 13% of total employment, compared with 6% in the Netherlands and Slovenia. In 17 of the countries under review, however, the proportion of employment in construction was between 6.9% and 9.1% of total employment.

In most countries, the share of employment in the sector increased between 2004 and 2007, with the only exceptions being Denmark and the Czech Republic where it remained unchanged, and Germany and Luxembourg where employment fell. Before the onset of the current economic recession, therefore, employment in construction was tending to grow across Europe. Growth was particularly rapid in all three of the Baltic states (Estonia, Latvia and Lithuania), particularly in Estonia, where the share of employment in construction increased by more than five percentage points over these three years. A high level of growth was also recorded in Bulgaria and Romania together with Ireland, while in Cyprus and Spain, the share was maintained at a high level throughout the period 2000–2007.

In all of these countries, with the sole exception of Romania, the overall growth of employment in the economy was significantly above that in the rest of the EU, averaging at over 4% a year in Ireland between 2004 and 2007, just under 4% in Spain and about 3% a year in Bulgaria, Cyprus, Estonia and Latvia, with growth in Lithuania amounting to some 2.5% a year.

Characteristics of construction sector

The characteristics of the workforce in the construction sector are similar in all European countries. The workforce is composed mainly of men, a large proportion of whom are manual workers, mostly aged between 25 and 54 years. A significant number of the workers are self-employed and the remaining workers on fixed-term employment contracts in a number of countries work in predominantly relatively small companies.

On average, therefore, only 8% of those employed in the construction sector in the EU and Norway are women, working mostly as clerks or secretaries. The proportion of women in construction exceeds 10% only in Austria, Germany and Luxembourg (12% in each case).

Over 75% of those employed in the sector are aged 25–54 years and only 11% are aged 55 years or over. In Denmark, Finland and the United Kingdom (UK), however, some 16% of those employed fell into the latter category in 2007, while Sweden recorded 21% of workers in this category. At the other end of the age spectrum, those under 25 years of age accounted for less than 15% of the construction workforce in all countries, apart from France, Denmark and the UK (15%–16%), Austria, Estonia, Latvia, Malta and Norway (18%–19%) and Ireland (21%).

The majority of those employed work as skilled manual workers, such as builders, carpenters, painters or electricians. Together, these workers accounted for over 60% of the total construction workforce in the EU in 2007. About another 7% were employed as drivers or plant operators and just under 10% as labourers or in other elementary jobs. Managers accounted for only 7% of the total workforce in construction and professionals of various kinds – such as architects, civil engineers and accountants – comprised just 10% (Table 2).


Table 2: Division of employment between occupations in construction, 2007 (%)

Occupational group

% of total employed

Managers

7.0

Architects, engineers and related professionals

6.6

Other professionals and technicians

3.5

Clerks

4.6

Building frame and related trades workers

28.7

Building finishers and related trades workers

20.5

Painters and related trades workers

6.1

Electrical mechanics and fitters

2.1

Other craft and related trades workers

4.5

Motor vehicle and other mobile plant drivers

5.6

Other plant and machine operators

1.3

Elementary occupations

9.6

Source: Eurostat, LFS, 2007

Only in Bulgaria, Luxembourg and the UK did skilled manual workers and plant operators – including drivers – account for less than 60% of those employed in the construction sector in 2007, although only slightly less 60% (see Annex, Table A1). Even in these three countries, however, if labourers and those in other elementary jobs are included, manual workers made up over 70% of employment in the sector, and over 80% in Bulgaria. Indeed, manual workers accounted for over 69%–70% of employment in all countries, apart from the Netherlands (67%). This group accounted for over 80% of employment in 11 countries and over 90% of employment in Greece.

Accordingly, managers and professionals make up under a quarter of the workforce in all countries except the Netherlands (25%), the Czech Republic (26%) and Finland (27%). As a result, job losses in the sector are more likely to affect manual workers.

In a number of countries, many of these workers are self-employed, working under contract to companies in the sector. In the EU and Norway, therefore, some 24% of those employed in construction in 2007 were self-employed and about two thirds of these (16% of the total) had no employees (Table 3).






Table 3: Division of employment by professional status, 2007 (%)

Country

Self-employed with employees

Self-employed without employees

Employees*

Of which: fixed-term (% employees)

Employees on standard contracts

AT

5.5

3.4

91.2

11.1

81.1

BE

10.2

13.2

76.6

4.8

72.9

BG

3.4

3.8

92.8

5.6

87.6

CY

9.1

15.9

75.0

6.1

70.5

CZ

6.5

30.4

63.1

7.2

58.6

DK

9.3

8.8

82.0

11.3

72.7

DE

10.5

7.9

81.6

15.3

69.3

EE

4.9

9.9

85.2

5.8

80.2

EL

12.9

17.2

69.9

14.7

60.0

ES

8.8

11.3

79.8

52.2

38.5

FI

9.6

13.5

77.0

13.2

66.9

FR

10.0

7.8

82.2

16.2

69.1

HU

10.0

10.6

79.4

10.7

70.9

IE

12.5

13.6

73.9

5.9

69.6

IT

12.1

23.2

64.7

12.1

57.1

LT

1.8

10.0

88.2

8.0

81.2

LU

5.9

0.0

94.1

6.3

88.2

LV

3.1

6.3

90.6

8.7

82.7

MT

8.3

25.0

66.7

0.0

66.7

NL

6.0

14.6

79.4

12.2

69.9

NO

3.4

12.6

84.0

8.8

76.6

PL

9.0

11.0

80.0

43.7

45.2

PT

8.4

14.4

77.2

29.6

54.5

RO

2.1

19.6

78.3

2.8

76.1

SE

8.3

11.4

80.3

11.7

70.9

SI

8.6

10.3

81.0

17.0

67.2

SK

4.2

31.8

64.0

7.3

59.3

UK

5.3

32.6

62.1

4.4

59.4

Total

8.5

15.7

75.8

19.9

60.9

Note: * Including unpaid family workers, averaging 1% of the total across all countries, but 2.5% in Greece.

Source: Eurostat, LFS, 2007

The number of self-employed workers without employees amounted to over 30% of total employment in the Czech Republic, Slovakia and the UK, where this form of work organisation was most prevalent, and 23%–25% in Italy and Malta. In each of these five countries, therefore, employees made up only two thirds or less of the total workforce when those running their own business – that is, self-employed workers with employees – are taken into account. In the other 23 countries under review, apart from Greece (where paid employees accounted for only just over two thirds of the total) and Ireland (74%), employees comprised 75% or more of total employment and over 90% in Austria, Bulgaria, Latvia and Luxembourg.

A significant proportion of employees in many countries, however, were on fixed-term or temporary employment contracts. In 2007, the number of workers on such contracts amounted to 20% across the EU as a whole. In Spain, over half (52%) of employees were employed on such contracts, in addition to 44% in Poland and 30% in Portugal, while this applied to only 15%–17% of employees in France, Germany, Greece and Slovenia.

The number of construction workers on non-standard employment contracts – temporary agency workers and self-employed workers – was, therefore, sizeable in many European countries and thus more significant than in other sectors of the economy. In Spain, less than 40% of those employed in the sector were on standard employment contracts, while this applied to only about 45% of construction workers in Poland, and 55%–60% in the Czech Republic, Greece, Italy, Portugal, Slovakia and the UK.

Moreover, construction is a sector dominated by small businesses. In the EU as a whole, some 42% of the total employees in 2006 worked in companies with fewer than 10 people, another 15% worked in companies with 10–19 people and about a further 16% in companies with 20–49 employees (Table 4). In total, therefore, around 73% of all those working in construction were employed in companies with fewer than 50 employees. In addition, since just over 15% of the total employees were employed in companies with 50–249 workers, only 12% of all construction workers across the EU and Norway were employed in large companies with a workforce of 250 people or more.






Table 4: Division of employment, by company size, 2006

Country

Company size (no. of employees)

1–9

1–19

20–49

50–249

250

AT

25.0

15.8

20.7

20.9

17.5

BE

44.3

13.2

16.9

17.0

8.6

BG

17.4

12.0

19.4

32.6

18.6

CY

39.3

13.8

13.5

15.1

18.2

CZ

45.5

11.3

14.1

16.8

12.3

DK

31.2

17.7

21.0

16.1

14.0

DE

36.7

20.7

18.4

16.8

7.4

EE

28.2

18.9

20.7

24.3

7.9

EL

57.3

17.3

10.6

9.4

5.4

ES

36.0

16.4

20.9

16.6

10.1

FI

39.5

13.3

13.1

13.9

20.3

FR

44.1

14.5

16.0

12.0

13.4

HU

50.6

14.5

15.1

13.2

6.6

IE**

-

-

-

-

-

IT

64.4

16.0

10.1

6.8

2.8

LT

18.3

9.0

18.4

39.4

14.8

LU

13.1

15.5

23.6

34.9

13.0

LV

15.1

13.6

21.1

37.1

13.1

MT**

-

-

-

-

-

NL*

37.2

12.3

15.7

16.4

18.3

NO

37.4

15.0

17.0

12.3

18.3

PL*

52.6

5.1

9.4

20.2

12.7

PT

45.1

15.6

15.5

14.9

8.9

RO*

17.2

8.2

14.6

31.7

28.3

SE

37.1

13.4

15.1

12.7

21.7

SI

40.5

12.0

12.9

20.0

14.5

SK

15.1

20.0

14.1

31.1

19.7

UK

36.9

12.6

12.8

15.8

21.9

Total

42.2

14.9

15.6

15.4

11.9

Notes: * Data are for 2005; ** No data available for Ireland and Malta.

Source: Eurostat, Structural Business Statistics

Although these various proportions differ across countries, in most of them, the general pattern is much the same. Only in Romania did large enterprises account for much more than 20% of total employment (28%). Moreover, Romania, Bulgaria, Latvia, Lithuania and Slovakia were the only countries where small companies with fewer than 50 employees accounted for less than half of total employment, in each case, as a vestige of the former communist regime. At the other extreme, companies with fewer than 10 employees accounted for over half of employment in Greece, Hungary, Poland and Italy (in the latter, almost 65%) and 44%–45% of employment in Belgium, the Czech Republic, France and Portugal.

Recent developments in output and employment

The financial and economic crisis, which began in the United States (US) and spread at varying speeds to other countries, depending largely on the state of their financial sectors and their economic links with the US, affected the construction sector across the EU Member States to differing extents during 2008.

In the EU and Norway as a whole, the index of production for the construction sector started to decline from the second quarter of 2008, and in the fourth quarter, production was over 7% less than a year earlier (see figure). However, new orders, which are a precursor of developments in 2009 and beyond, declined by 14% compared with the same period in 2007.

Employment, which always lags behind changes in production, although to varying extents depending on new orders and on expectations about future developments, was about 3% lower at the end of 2008 than a year earlier.

Quarterly indices in construction sector, EU27 and Norway, 2005–2008

Source: Eurostat, Short-term indicators

Quarterly indices in construction sector, EU27 and Norway, 2005–2008

The decline in production in the construction sector, however, started earlier in some countries and has differed markedly in terms of scale as well as its consequences for employment, reflecting in part the extent of the expansion of the sector in earlier years and, in part, the general health of the economy. In Ireland and Spain, in particular, where construction had grown significantly over the preceding 10 years and had come to account for a large share of total employment in the economy, the decline in production was already evident by the second half of 2007. The decline was also evident during this period in Hungary, which was facing growing economic problems.

In Ireland, therefore, production was some 18% lower in the fourth quarter of 2007 than it had been a year earlier. In Hungary, production was 22% lower in the same period, while in Spain, where the decline was initially more gradual, it was about 8% less (see Table A2 in the Annex). The proportion of people employed in construction in Ireland was already some 6% smaller at the end of 2007 than it had been at the end of 2006, while the share of employment was 12% smaller in Hungary. In Spain, the decline in output had not yet affected employment and the proportion of people in employment in the sector was almost 3% higher than a year earlier.

In 2008, production in construction stabilised in Hungary, although employment continued to fall but at a slower rate. Meanwhile, in Ireland and Spain, the decline in production accelerated. For instance, in Ireland, output was over 26% lower in the fourth quarter of 2008 than in the same quarter of 2007 (and 40% lower than two years earlier) and in Spain it was 18% lower. Other countries also showed significant reductions over the year, especially among the new Member States (NMS) that joined the EU in May 2004 – for example, Bulgaria registered a decline in production of 8%, Lithuania about 14%, Latvia 16% and Estonia 19%. Among the former EU15 countries – before the entry of the NMS to the EU in 2004 – output declined by almost 9% in Belgium and over 7% in the UK.

At the same time, production increased in seven countries, although by less than 4%, except in Sweden (almost 8%), Slovakia and Romania (about 14% in each country).

The fall in production in Ireland and Spain was associated with a substantial reduction in employment during 2008. At the end of 2008, employment in both countries was 20%–21% lower than it had been at the end of 2007 (see Table A3 in the Annex). In the other countries under review, employment fell by much less or actually rose. Indeed, employment increased in the majority of the countries during 2008, even if only slightly in most cases. Employment fell by over 2% only in Malta (3%), Portugal (3%), Hungary (5%), Estonia and Denmark (almost 6% in both cases). In many countries, therefore, the decline in production in the latter part of 2008 was not reflected in a reduction in employment before the end of 2008 – although no data for the fourth quarter of 2008 were available for a number of countries at the time of writing.

The decline in new orders during 2008 is relatively general across the EU, with only Austria (although only slightly), Romania and Slovakia, showing an increase among the countries for which data are available – namely 15 of the EU Member States plus Norway (see Table A4 in the Annex). In Norway, Sweden and the UK, new orders were down by 25%–30% in the last quarter of 2008 compared with the same quarter in 2007, despite the fact that employment in Norway and Sweden at the end of 2008 was still above the level recorded a year earlier. Furthermore, in Luxembourg, Poland and Portugal, new orders were down by over a third in the last quarter of 2008. In these countries, in particular, therefore, a substantial decline in production is expected during 2009, and will be accompanied before long by a marked reduction in employment. At the same time, however, government efforts in many countries to counter the decline in demand, which have involved an expansion of public investment, may serve to offset such a reduction.

Developments in divisions of construction sector

The developments in output and employment outlined above conceal significant differences between different parts of the construction sector. According to almost three quarters of the national reports for this study, the construction of new buildings, and of residential buildings in particular, has been hit hardest by the downturn, while civil engineering, renovations and repairs have been less severely affected. Moreover, in seven countries – Ireland, Cyprus, Finland, Latvia, Malta, Slovakia and the UK – some building projects that were already underway have been abandoned.

The decline in production in the construction sector, moreover, has had a differential effect on companies of different sizes, with the effect varying across countries. In Denmark, Slovakia, Sweden and the UK, large companies seem to have been hit hardest by a fall in production, while in Germany, Lithuania, Poland and Portugal, small enterprises have been most adversely affected. In Austria, Cyprus and Finland, on the other hand, the effect has been relatively uniform between different-sized companies.

The decline has also had a knock-on effect on other industries. In almost half of the countries under review – Belgium, the Baltic states, Cyprus, Denmark, Italy, Malta and Spain – signs have emerged of a reduction in output among companies manufacturing building materials in brick-making, cement, wood, glass and metalworking industries. In addition, in Cyprus and Poland, there are also signs of adverse effects, and of job cuts, in the real estate sector.

In addition, signs have emerged of a differential effect on the workers employed in the construction sector. In many countries – such as Belgium, Cyprus, Denmark, Germany, Ireland and the UK – cutbacks in employment seem to have adversely affected low-skilled workers, as employers have sought to retain their skilled workers. Moreover, in a number of countries – Denmark, Ireland, Spain and the UK – younger low-skilled workers have been most affected, while in Ireland, Spain and the UK as well as Greece, Latvia and Norway, migrant workers were also affected by jobs cuts. In Ireland, it is reported that many migrants who have lost their jobs have returned to their home country. In addition, it has been reported that some Irish nationals who have lost their construction jobs have also been looking abroad for employment.

Policy responses of companies

Companies have adopted a range of different policies to respond to the downturn in the construction sector. These include reductions in working time, temporary dismissals and wage cuts, as well as redundancies. In over half of the countries covered in this study, the reduction in the workforce has mainly affected those on temporary employment contracts – many of them low-skilled workers and a significant number of them migrants in some countries – or self-employed individuals working under contract.

Moreover, in countries, such as the Czech Republic, where the construction sector has not yet been significantly hit by the recession, the workforce reductions that have occurred to date have been concentrated on the non-renewal of temporary employment contracts. At the same time, in Latvia and Lithuania, companies have tended to employ workers on temporary and service contracts rather than on a permanent basis, in order to allow for more flexibility in times of worsening economic conditions.

Companies in a number of countries have reduced working hours in order to cope with the economic conditions, although less so than those that have cut back employment. This has been the case in Austria, Denmark, Estonia, Ireland, Luxembourg, Norway and Poland. However, in some countries – Finland, Latvia, Lithuania, Slovakia and Spain – employers have used temporary measures to reduce wage bills without cutting jobs. These measures have included temporary layoffs and unpaid leave.

Companies have also reduced wages directly in some countries – for example, in Denmark, Estonia, Ireland, Latvia and Norway, in particular – in order to achieve a similar effect on the wage bill.

Policy responses of governments

Governments across the EU have also adopted a range of measures to deal with the recession. In the majority of countries, these measures have included policies directed specifically at the construction sector, particularly in relation to an expansion of public works programmes or the acceleration of investment which had already been planned. The countries concerned include Belgium, Denmark, Estonia, Finland, Ireland, Lithuania, Norway, Portugal, Spain and the UK. Much of the expenditure has gone on infrastructure, such as roads and railways, as well as on non-residential building, maintenance and repairs.

In some countries – such as Belgium, Finland, Italy and Sweden – governments have introduced tax concessions in order to stimulate demand in particular parts of the construction industry, particularly housing construction. In Sweden, therefore, additional tax allowances have been introduced on repairs, maintenance and modifications to certain buildings. In Finland, allowances have been introduced on the renovation and repair of houses. In addition, the ceiling for tax relief on mortgages has been raised in Italy, and the value-added tax (VAT) rate on new houses in Belgium has been reduced from 21% to 6%; both of these measures have been introduced to encourage housing construction in these countries.

Subsidies have also been introduced in a few countries. For example, in Spain, subsidies amounting to €8 billion have been allocated for local investment in public buildings and civil engineering projects, while in Finland, subsidies have been introduced on renovation and on building for rental purposes in order to complement tax concessions.

In a number of cases, governments have also intervened to change the rules and regulations relating to social security payments in order to help maintain the incomes of the workers affected by company measures to reduce wage bills. In Finland, increased social security payments have been introduced for those made redundant who had been with the same employer for over three years. In Sweden, special income support measures have been implemented for workers made redundant who are members of an unemployment insurance funds. In Spain, unemployment benefits have been extended to those who are partially unemployed, in the sense that they have been laid off temporarily or have had their working hours reduced.

In practice, workers who are temporarily laid off are entitled to some form of social benefit in just under half of the countries included in this study, while those whose working hours have been reduced have access to social benefit in even fewer countries. Moreover, entitlement to social benefit typically depends on the payment of social security contributions for a minimum period or membership of an unemployment insurance fund, which is the case in Denmark and Sweden. This may mean that those on the fringes of the labour market, such as migrants, temporary agency workers or self-employed workers, do not qualify for benefits.

In some countries, governments have considered active labour market measures, especially training programmes, to improve the employability of low-skilled workers losing their jobs in construction and, at the same time, to tackle skills shortages. In Ireland, for example, the national Training and Employment Authority (Foras Áiseanna Saothair, FÁS) has increased the provision of training opportunities for construction workers made redundant in emerging areas of expertise, such as the installation of equipment and material to increase energy efficiency or to take advantage of renewable energy sources. In addition, in Latvia, the State Employment Agency (Nodarbinātības valsts aģentūra, NVA) has carried out research to identify future needs in the construction sector and to plan training programmes to address these needs.

In other countries, governments have introduced more direct support to help companies to cope with the financial costs of the economic downturn. In Germany, companies can apply for short-time working allowances – amounting to 60% of the reduction in wages – when wages are cut by over 10% for at least a third of the workforce, which they can then pass on to employees. Employers can also be reimbursed for half of the social security contributions payable for staff members working reduced hours. In Norway, modifications of the rules governing layoffs mean that employers need to pay wages for only five days instead of 10 days and employees are entitled to benefits for 52 instead of 30 weeks, thus making it easier for companies to use temporary layoffs as a means of reducing their wage bill rather than having to resort to redundancies. In Bulgaria, in order to safeguard jobs, the government has introduced compensation equivalent to half the minimum wage for those who switch to working part time.

In several countries, especially those in southern Europe – such as Greece, Italy and Spain – the regulations applying to public works have been amended so as to reduce the time between invoicing and payment in order to increase company liquidity.

National reports

Belgium

Features of employment in construction sector

While most of the workforce in Belgium’s construction sector comprises employees with permanent employment contracts, the number of temporary agency workers has progressively risen since 2002, although they still account for only a very small proportion of employees. The sector is also one of those most affected by undeclared work and it is estimated that migrants employed illegally in construction activities increases total employment by almost 30%.

Recent developments

The demand for new buildings, especially for residential use, rose continuously from 2003 until the first few months of 2008. There was a much slower increase in civil engineering projects. Demand stabilised during 2008 and a downturn followed in both house and non-residential building, while renovation projects continued to grow. Employment is unlikely to fall significantly and employers will seek to retain their skilled workers as they are generally hard to find in Belgium.

Since 2007, the demand for building licences has fallen. In the last quarter of 2008, demand for new apartments declined, with many residences remaining unsold. This slowdown is likely to have consequences for employment, with temporary agency workers being among the first affected.

The cement industry, which benefited from the earlier growth in construction, has seen sales stagnate since 2007, while the glass industry has experienced a significant downturn.

Policy responses of companies to developments

The number of bankruptcies in the economy as a whole reached record levels at the end of 2008 with significant effects on employment. In construction, companies have tended to lay off workers temporarily and have not renewed the contracts of temporary agency workers. Companies were reluctant to make skilled workers redundant because of shortages of qualified labour.

Policy responses of government to developments

At the end of 2008, the Belgian government launched its economic stimulus plan, with the construction sector as one of the main recipients. The VAT rate on new buildings was reduced from 21% to 6% in order to encourage housing construction and renovations, while tax reductions were also introduced for construction projects with low energy emissions. In addition, several new road construction projects were announced to assist the civil engineering sector. According to the employer association for the sector, the Construction Confederation (Confédération Construction), the measures are likely to prevent construction activity from declining.

Workers who are temporarily unemployed for economic reasons are entitled to unemployment benefits, which were increased by 10% for the 2009 2010 period.

Bulgaria

Features of employment in construction sector

Low-skilled workers in Bulgaria make up a larger share (about 23%) of employees in construction than in the rest of the EU. Moreover, employees with permanent employment contracts account for a larger proportion of the workforce (almost 90%) than elsewhere. A higher proportion of the workforce (over 51%) is employed in medium-sized (with 50 or more employees) or large companies (with 250 or more employees) than in most other countries included in this study.

Recent developments

The downturn in production in the construction sector, evident in the fourth quarter of 2008, continued in the first months of 2009 and orders have continued to fall, with the expectation of a further decline in the coming months. Employment in the sector is also expected to decline further. The number of enterprises with financial problems is increasing and the adverse effects of the unfavourable economic situation are becoming more serious.

Although housing construction has been hit hard by the economic recession, civil engineering continues to expand due to government investment supported by the European Structural Funds. The number of planning permits issued for new houses was down by 15% in the fourth quarter of 2008 compared with a year earlier, while permits for offices fell by 21% over the quarter. In December 2008, however, construction of civil engineering projects was some 3% higher than in December 2007.

The reduction in the demand for building materials has led to the main manufacturers freezing investment for the coming year.

While the downturn in construction will mainly affect low-skilled workers, some 3,000 vacancies remain in the sector for skilled workers.

Policy responses of government to developments

Government policy is to continue to expand investment in infrastructure as a partial measure to counteract the decline in housing construction. The government has included almost €1.1 billion in its 2009 budget for this purpose. In addition, the government has introduced compensation equivalent to half the minimum wage for employees who change over from working full time to working part time in an attempt to maintain employment. Overall, about 19,000 people are estimated to receive payment in this way.

Czech Republic

Employment features in construction sector

Some 37% of those working in the construction sector in the Czech Republic are self-employed, the great majority of them having no employees. Although, therefore, relatively few employees had temporary employment contracts, less than 60% of employees in the sector had permanent contracts. There is also a relatively high level of employment in small and medium-sized enterprises (SMEs), especially in very small companies with fewer than 10 employees, which account for almost 46% of the workforce.

Recent developments

In November 2008, output in the construction sector was almost 6% less than a year earlier, while output from building was down by almost 13%. In civil engineering, however, output was still rising, although at a declining rate, and was 3% higher than a year earlier. Planning permissions for new buildings were also lower, although those for repair and improvements were higher, but not in the residential sector.

Large companies have been harder hit by the downturn in the industry, although companies of all sizes have experienced a reduction in output. In companies with 1,000 or more employees, production fell by 15% in the year up to November 2008, while in those with 100–199 employees it fell by almost 10% and in small companies with 25–49 employees by only 2%.

In 2007, the sector recruited temporary agency workers from abroad in response to labour shortages. These workers will help alleviate the impact of the recession, in the sense that they are the first to be laid off as a result of a decline in output. Mass redundancies have, therefore, seldom occurred to date, apart from a few cases in the building materials industry.

Policy responses of companies to developments

As noted above, employers experiencing declining sales have tended to lay off temporary agency workers first, mostly those recruited from abroad and many of them without any alternative source of income. However, this situation is now being addressed by the Ministry of Labour and Social Affairs (Ministerstvo práce a sociálních věcí ČR, MPSV ČR). The sector, however, still suffers from a shortage of skilled labour and companies seem likely to attempt to maintain the employment of such workers. It is hoped that public investment in infrastructure will prevent a decline in output in the construction sector in 2009.

Policy responses of government to developments

The impact of the economic crisis was felt later in the Czech Republic than in other European countries, partly because the banking sector was in relatively good shape. No special measures had been taken to assist the construction sector up to the first few months of 2009. The Association of Building Entrepreneurs of the Czech Republic (Svaz podnikatelů ve stavebnictví v ČR, SPS) has advised the government not to cut back on public works programmes and to increase the budget deficit if necessary. It has also proposed a reduction in VAT on construction work.

Denmark

Employment features of construction sector

Self-employed people account for a relatively small proportion of the workforce in the Danish construction sector. The majority of workers (over 72%) in the sector are employees with permanent employment contracts. Employment in small enterprises is less than the EU average – under half of the total – and a slightly larger proportion of the workforce is employed in large and medium-sized companies.

Recent developments

After several years of relatively high activity in construction, the sector is experiencing a reduction in output, an increase in layoffs and a decline in new orders. In February 2009, 53% of the companies in the sector reported a decline in orders. Unemployment among construction workers reached almost 10% of the workforce in January 2009 compared with just over 3% a year earlier. Moreover, it is feared that the unemployment rate could increase to 17% before the end of 2009. It is estimated that about 20,000 people lost their job in the sector from the beginning of 2007 to 2009.

Companies most affected have been those specialising in new builds, while output in the renovation and road construction sectors has been maintained at a relatively high level. Bricklayers have been particularly affected, with unemployment affecting as high as 23% of workers in this group in January 2009. However, unemployment rates were also high among painters, decorators and carpenters, with young people being especially affected.

Policy responses of companies to developments

Companies have cut back employment, although they have also attempted to retain core skilled workers through work-sharing arrangements and wage cuts in order to reduce labour costs (DK0903021I).

In recent times, two cases of restructuring in the construction sector have been reported in the European Restructuring Monitor (ERM). The first case referred to Gelsted Bygningsindustri, a producer of skylights owned by the Velux group, which went bankrupt in October 2008 with 230 people losing their jobs (see ERM factsheet). The second case referred to Rational Vinduer, which closed down in January 2009 resulting in 180 job losses (see ERM factsheet). During 2008, some 715 companies in the sector went bankrupt, which was 63% more than in 2007.

Data on the sector reveal a reduction during 2008 of workers from central and eastern European countries employed in the sector. The number of workers from these countries declined from 12,784 to 8,814 workers in one year. However, studies suggest that migrant workers are not necessarily the first to be made redundant when employment is reduced.

Policy responses of government to developments

The Danish government has allocated a total of €200 million for new construction and renovation projects and will review with municipalities the possibility of accelerating plans for public works for 2009 amounting to another €200–270 million. Nevertheless, a ceiling remains in place on the total to be spent on public works. This ceiling was introduced in the past because of labour shortages. Both the Danish Construction Association (Dansk Byggeri) and the cartel of trade unions in construction – the Building, Construction and Wood Cartel (Bygge-, Anlægs- og Trækartellet, BAT-Kartellet) – have requested an expansion of public construction programmes by bringing forward projects for council housing and public buildings and the renovation of schools and other public sector properties.

Unemployment benefits are payable to workers who have either experienced a significant reduction in working time or have been laid off for a temporary period. However, payment depends on membership of an unemployment insurance fund. The relatively few workers not covered are likely to be entitled to income support.

Germany

Employment features of construction sector

Unlike in most EU countries, the number of self-employed workers with employees is higher in Germany than the number of those without employees. However, overall, self-employment in Germany is less significant than the average for the EU. Workers on fixed-term employment contracts make up 15% of total employees, which is less than the EU average but higher than in most other countries. Many of these were apprentices on trainee contracts who made up over 6% of total employees in the construction sector in 2007. A slightly large proportion of employment was in small companies with fewer than 50 employees (76% of the total) and large enterprises accounted for just over 7% of the construction workforce.

Recent developments

The construction sector suffered a long period of stagnation following the construction boom in eastern Germany during the 1990s. Since 2005, production has remained substantially below its level in 2000, with housing construction being the area of activity most affected. Employment has remained largely unchanged since 2005 and at the end of 2008 it was lower than in 2000.

The construction sector in Germany appears to be less vulnerable to the economic downturn than in other EU countries because companies have already carried out significant restructuring in the recent past. Indeed, the number of insolvencies in 2008 amounted to about 1,700 compared with some 4,900 cases in 2001.

Growth in non-residential building amounted to 10% in the first 10 months of 2008, with companies with 20 employees or more benefiting most from this, with their turnover increasing by almost twice as much as that of smaller companies.

In October 2008, the volume of new orders declined by almost 3%, while new orders in housing construction fell by over 4%, which suggests an imminent downturn in production. This downturn is expected to hit small companies with fewer than 20 employees first, since these tend to be most involved in the housing construction part of the industry. Despite the unfavourable outlook, the adverse effect on employment is expected to be relatively modest – a decline of less than 1% – and skilled workers are not expected to be affected at all in 2009.

Policy responses of government to developments

Short-time working allowances (Kurzarbeitergeld), amounting to 60% of the wage reduction, are payable to companies that reduce wages by over 10% for at least one third of employees in order to cope with a temporary shortage of orders or restructuring. The companies, which are responsible for paying social security contributions for the employees concerned, are to be reimbursed for half of this amount.

The federal government has introduced two packages to stimulate aggregate demand. The first package, totalling €6 billion, is geared towards modernising the insulation of buildings and improving municipal infrastructure in deprived areas. It is estimated that this will safeguard or create around 34,000 jobs in the construction sector alone. The second package includes €14 billion for renovating public buildings and other infrastructure.

Estonia

Employment features of construction sector

A larger proportion of the workforce in construction in Estonia (almost 23%) is aged under 25 years than in other countries, while only just over 7% is over 55 years of age. A relatively small proportion of the workforce is self-employed and fewer employees are on fixed-term employment contracts compared with other countries. As a result, over 80% of employment consists of workers on permanent contracts. However, these figures do not fully reflect the situation in Estonia’s construction sector because of the importance of informal, or shadow, activities in the sector.

Recent developments

Production in the sector increased strongly in 2006 and 2007 but began to decline in the third quarter of 2008. Employment has also started to decline. However, the latter is not yet reflected in the official statistics which do not include informal workers – estimated to account for 27% of the total workforce in the sector – who have mainly been affected by the fall in employment. In December 2008, 61% of companies in the sector declared that they had reduced their workforce. Moreover, by February 2009, the number of construction workers registered as unemployed was more than double the level recorded in the summer of 2008.

In December 2008, some 82% of companies surveyed reported a decline in demand. Thus, employment in the building materials industry is expected to decline significantly during 2009.

Policy responses of companies to developments

As well as cutting back on the number of informal workers, several companies reduced working time in 2008. However, the number of workers affected by this move was relatively small.

Many Estonian construction workers are employed abroad, especially in Finland, where almost half of migrant workers in Finland’s construction sector are from Estonia. It is expected that about 5,000 of these workers will return to Estonia in 2009, with many having already returned.

Policy responses of government to developments

Government support for the construction sector has been limited to road building, where EU Structural Funds are an important source of finance.

By law, companies implementing a reduction in working time as a response to the economic downturn can do so only for three months during the year and the reduction concerned cannot exceed 40% of current working time. Workers laid off for a temporary period are not eligible for unemployment benefits, although they are entitled to at least 60% of the national minimum wage from the employer.

Ireland

Employment features of construction sector

A higher number of workers in the construction sector in Ireland are aged under 25 years compared with any other EU country. Self-employed workers with employees account for a larger share of employment in the sector (almost 13%) than anywhere else in the EU, while the proportion of employees with fixed-term employment contracts is much smaller than the EU average.

Recent developments

The volume of output in the sector fell considerably in both 2007 and 2008, affecting disproportionately housing construction, where output declined by almost 50% in 2008. This was partly offset by a small increase of 5% in non-residential building work, while output in civil engineering fell slightly by 2%.

Employment declined considerably during 2008 (by around 20% from the fourth quarter of 2007 to the same period in 2008), following a decline in 2007 of around 6%. The fall in employment was concentrated in the residential sector, which shed some 40,000 jobs in the 12 months up to the second quarter of 2008. Young people, predominately men, were mostly affected, with the number of workers aged under 25 years falling by 23% (13,500 workers). At the same time, the proportion of construction-related apprenticeships was reduced by over 50%.

It seems that a large number of foreign nationals working in the sector have lost their jobs, with many of them returning home or leaving Ireland to seek work elsewhere. In addition, it is expected that many native Irish construction workers will also have to resort to looking for jobs abroad.

Policy responses of companies to developments

Most construction companies have responded to the downturn by reducing their workforce through redundancies or, to a lesser extent, through the non-renewal of temporary employment contracts. Some companies have also introduced short-time working.

At the end of 2008, The Construction Industry Federation (CIF), which has over 3,000 members in Ireland, rejected the terms of a new national pay deal – the ‘Transitional Agreement (2.8Mb PDF)’ – under which wages were to be increased by 6% over 21 months. Instead, CIF requested that trade unions in the sector agree to a 10% reduction in wages. The trade unions responded by insisting that companies should honour the national agreement. To date, the outcome remains uncertain.

Policy responses of government to developments

The Irish government had been engaged in discussion with the social partners over policies to combat the economic recession, which have centred on maintaining liquidity in the banking sector and have not focused on the construction sector specifically. The government has, however, instructed FÁS to focus the provision of support and retraining opportunities on construction workers and apprentices who have been made redundant. The aim is to counter the downturn in housing construction by expanding other areas of the construction industry, such as renovation and maintenance works as well as civil engineering. Some emphasis has been placed on training programmes in emerging areas of activity such as the installation of energy-efficient equipment and the use of renewable energy sources in construction.

In addition, workers in the sector whose working hours have been reduced below a certain level are entitled to supplementary income support.

Greece

Employment features of construction sector

Over 30% of those working in the construction sector in Greece are self-employed, the majority of them without any employees, who effectively work for companies on a contractual basis. Since some 15% of the remaining employees are on temporary employment contracts, employees on permanent contracts make up only 60% of the total workforce. A large proportion of companies in the sector are engaged in building rather than civil engineering, mostly consisting of small companies with fewer than 50 employees, which account for 75% of employment.

Recent developments

The sector has been in significant decline since the last quarter of 2008. Employment has yet to show a decline, although a considerable number of migrants are employed informally in the construction sector and therefore are not included in the official statistics. In 2008, according to official data, 11,408 people left the sector, of whom some 9,086 were Greek nationals and 2,322 were migrants (about 20% of the total workforce).

The current unfavourable conditions in the sector are illustrated by the fact that around 200,000 newly built houses remain unsold and loans for the purchase of housing have declined markedly. Moreover, the number of building permits issued in the 10 months from January to October 2008 was almost 16% less than in the same period in 2007.

At the beginning of 2009, 70% of the construction companies in the former Yugoslav Republic of Macedonia announced that they had already made staff cuts, while a study by the Athens University of Economics and Business (Οικονομικό Πανεπιστήμιο Αθηνών, AEUB) forecast that 50,000 people employed in the construction sector would lose their jobs in 2009 – about 12%–13% of the sector’s workforce.

Policy responses of companies to developments

As well as making workers redundant, a number of companies in the sector have suspended staff temporarily or requested them to take compulsory leave, thus curtailing their earnings without any guarantee of reinstatement. Merger activity in the sector has increased in an effort to alleviate economic problems.

Policy responses of government to developments

To date, the Greek government has concentrated on providing support to the financial services sector in response to economic developments. The construction sector has called for measures to tackle the downturn in the industry. In particular, construction companies have called for an expansion in the public investment programme for 2009 by accelerating many small and medium-sized projects and an end to delays in payment for completed work.

Spain

Employment features of construction sector

The relative number of self-employed people is in line with the EU average, but the number of employees on temporary employment contracts is higher than any of the other countries included in the study, with the result that less than 40% of those employed in the construction sector are workers with permanent employment contracts. The importance of small companies in the sector is similar to the situation in other countries, although they tend to be slightly larger in size in Spain.

Recent developments

Production in construction has fallen markedly since mid 2007 and new orders declined in every month in 2008. As a result, the number of employees declined by about half a million people during 2008, reflecting a fall of some 20%. The reduction was concentrated to a large extent on the residential sector and the stock of unsold houses is estimated at between 800,000 and one million.

The number of workers in the sector registered as unemployed at the end of January 2009 amounted to 607,905 people, which is over double the number at the beginning of 2008. Over a fifth of those affected by unemployment are migrants (128,486 people) and of these, almost three quarters come from outside the EU. The reduction in employment has mainly affected low-skilled workers, the proportion of whom declined by 32.5% over the three years up to the last quarter of 2008, while the number of skilled workers fell by 10%. Staff cutbacks have hit both young people under 25 years of age and older workers aged 55 years and over, in particular, with their share of employment falling in both cases.

Building material manufacturers have also been affected by the crisis, with the production of cement falling by 24% during 2008, while sales of building bricks and ceramic products fell by about 30%.

Policy responses of companies to developments

Many companies in the sector have reduced employment or closed down completely. Two large cases have been reported in the ERM. The first concerns Marina d’Or, which, at the beginning of 2008, employed 3,500 people. In April 2008, it reduced its workforce to 1,000 people and laid off a further 214 workers in October 2008 (see ERM factsheet). The second case relates to Martinsa Fadesa, which, starting with a workforce of about 1,200 people, first cut employment by 298 workers and then a few months later by a further 234 workers (see ERM factsheet).

Policy responses of government to developments

The government has introduced a number of measures to assist the construction sector, including a special budget amounting to €8 billion to expand investment in public buildings and civil engineering works. The government has also increased construction of social housing, extended the period over which mortgages are repayable and stimulated the rental housing market with facilities for owners and tenants. In addition, incentives have been introduced for renovating buildings and improving their energy efficiency, while regulations have been tightened to ensure timely payment for completed work by public authorities.

At the same time, unemployment benefits have been extended and it is expected that partial unemployment benefits – which apply to people working short-time hours – will be introduced in the future.

Italy

Employment features of construction sector

About 35% of those working in the construction sector in Italy are self-employed, which is a significantly higher proportion than the EU average. Most of those who are self-employed have no employees. Taking account of those employed on fixed-term employment contracts, this means that only 57% of those working in construction have permanent employment contracts. Moreover, over 14% of those employed in the sector are foreign workers and some 50,000 companies are foreign owned. Companies in the sector are smaller than in other countries, with those with fewer than 10 employees – who are often family members – accounting for 64% of total employment. In addition, there is a considerable amount of undeclared work in construction, with estimates suggesting that it accounts for some 11% of all such work in Italy.

Recent developments

Over the period 1998–2007, output in construction grew at around twice the rate of gross domestic product (GDP), largely due to a boom in demand for private housing, fuelled in turn by easy access to credit. Employment over the same period increased by 31% to almost two million workers.

In the first half of 2008, house sales fell by 14% and declined further in the second half of the year, exacerbated by the economic recession. Industry output fell in 2008, but only by around 2% up to the third quarter of the year. This was the result of a fall in new building projects, offset by a small rise in renovations. Calls for tender for public works below €2.5 million declined during the year, while calls for tenders above this amount increased by 42%.

The downturn has hit medium-sized companies, in particular. While micro enterprises have more flexibility and, overall, are more involved in undeclared activity, and large enterprises are more involved in public sector contracts, medium-sized companies have been hit by the decline in the housing market as well as by a reduction in small public works carried out by local authorities.

Employment among administrative staff seems to have declined and the people concerned find it more difficult to obtain another job than skilled manual workers, especially if they are aged over 50 years.

In related sectors, production of cement fell by 17% and brick-making by 22% during 2008.

Policy responses of companies to developments

Estimates suggest that 30% of the total 780,000 construction companies are at risk of closure and about 300,000 workers could be made redundant. Companies have asked the government to increase public investment in infrastructure, make it easier for small enterprises to obtain credit and simplify procedures for participation in calls for tender for public contracts.

Policy responses of government to developments

The government has introduced a number of general measures to tackle the economic crisis, including some which are likely to assist the construction sector. These measures include changes in the procedure for claiming tax reductions of 55% on energy saving options when renovating buildings, an increase in the ceiling for claiming tax allowances on mortgage payments, and making it easier and quicker for companies to obtain payment after completing projects for the public sector.

Workers who have their hours reduced during the recession can qualify for compensation, and a special unemployment benefit has been introduced for construction workers employed for fewer than 18 months by the same company and who have worked on a construction project for the public sector.

Cyprus

Employment features of construction sector

The division of employment in the construction sector in Cyprus between self-employed people and employees is similar to the EU average, although more of the employees concerned have permanent employment contracts. Slightly fewer people than in the rest of the EU are employed in small enterprises and a larger proportion of people in companies with 250 or more employees.

Recent developments

There are few signs that the economic recession had hit the sector during 2008 and the latest figures for production show a small increase up to the third quarter of the year. Employment in the sector also continued to rise during 2008.

However, the number of planning permits for new builds issued between January and November 2008 was 7.5% less than during the same period in 2007. Moreover, the construction of holiday homes for foreign buyers seems to be declining and evidence has emerged of a suspension of some building projects that were due to begin in 2009.

In related industries, production in the wood industry fell significantly in the year to November 2008, while cement production in the last quarter of the year was around the same level as in the same period in 2007. The real estate sector seems also to have been adversely affected by the downturn, with 180 people losing their jobs as a result of the closure of regional offices by large companies.

Policy responses of companies to developments

The initial action taken by companies in the sector has been to reduce overtime working.

Policy responses of government to developments

The government has announced measures that aim specifically to address the effect of the economic crisis on the construction sector. These consist of bringing forward the commencement of major public works projects, the provision of funds to municipalities for infrastructure projects and helping young couples with low and medium-level incomes to acquire homes. Measures have also been taken to ease access to credit. A survey of companies in the construction sector revealed that 27% of employers were experiencing problems in borrowing and 21% had liquidity problems.

Although employees in the sector who have lost their jobs are entitled to unemployment benefits for up to six months, as long as they have paid social security contributions in the previous year, a substantial number of self-employed people are not entitled to benefits.

Latvia

Employment features of construction sector

A relatively large proportion of workers (19%) in the construction sector in Latvia are young people aged under 25 years, which is due to the rapid expansion of the sector in recent years. In addition, relatively few of those working in the sector are self-employed – less than 10%, which is less than half the EU average. However, this may reflect the widespread informal employment that exists in the sector, which seems to account for some 38% of total unregistered employment in the economy. Small companies are less prominent than in other European countries, as about half of the employees in the sector work for companies with 50 or more employees.

Recent developments

Output in construction fell markedly during 2008, largely reflecting a decline in building as well as in repairs and renovations. On the other hand, civil engineering output remained stable up until the third quarter of 2008, when it too began to decline.

Employment was down slightly in the third quarter of 2008 compared with a year earlier and the number of job vacancies declined dramatically from 1,044 to 297 positions in the year up to then. The number of registered unemployed people previously working in construction increased from 2,718 in June 2008 to 6,086 people in December. At the same time, the number of approved work permits for foreign workers declined from 1,865 in 2007 to 823 permits in 2008.

Some evidence has emerged that a number of building projects have not been completed and some buildings designed as houses are being adapted for non-residential use.

It is expected that small enterprises in the sector are likely to be worst affected by the economic downturn. Moreover, it has been reported that people are already losing their jobs, although many of these are usually unregistered workers.

Manufacturing of building materials declined in the first three quarters of 2008.

Policy responses of companies to developments

A growing number of companies have been competing for state and local government contracts as other parts of the industry have declined. As a result, companies have to cut wages and have required employees to take unpaid leave in order to reduce their wage bills.

Policy responses of government to developments

No specific government action has been taken to date to support the construction sector. However, public investment programmes are being maintained rather than being cut back. Furthermore, no special measures are being taken to assist construction workers who have access to the same benefits and active labour market programmes as others.

Lithuania

Employment features of construction sector

As in Latvia, relatively few of those working in construction in Lithuania are self-employed (12% of the total workforce) and over 80% of workers have permanent employment contracts. Again as in Latvia, small companies are less prominent than in other countries and well over half (54%) of employment is in medium-sized and large enterprises.

Recent developments

Output in construction increased substantially in the eight years up to the third quarter of 2008, reflecting a three-fold growth. However, the level of output declined from then on, being some 10% lower in the fourth quarter of 2008 than a year earlier. At the same time, the number of planning permits issued in the third quarter of 2008 fell by 13% compared with a year earlier.

Employment in the sector also declined in the third quarter of 2008 by some 4% relative to the same quarter in 2007.

In 2008, most of the companies that went bankrupt were small; although it is likely that larger companies will be more affected by the downturn in 2009.

Policy responses of companies to developments

The main response of companies to the downturn in the sector has been to reduce employment. In 2008, most workers losing their jobs were employed in SMEs. However, in 2009, surveys indicate that around 15%–20% of large companies intend to reduce their workforce. Some companies also plan to employ more workers under fixed-term employment contracts so that these can be more easily terminated if the company’s financial situation worsens. A few companies have, in addition, allowed their employees to take unpaid leave as a measure to reduce costs.

Policy responses of government to developments

The Lithuanian government is drawing up an Economy Facilitation Plan (EFP), with a focus on revitalising the construction sector. The objective of the plan is to allocate some €667 million in extra expenditure. A key element of the plan is the renovation of apartment blocks. It is planned to renovate 2,000 houses and a number of public buildings – such as schools and kindergartens – in 2009. Most of the projects will be financed by the EU Structural Funds and loans from the European Investment Bank (EIB), as well as from Lithuanian commercial banks. In addition, the government plans to simplify regulations applying to renovation, construction and land in order to speed up the work.

The government also plans to extend the duration of unemployment benefit payments by several months in areas where the rate of unemployment significantly exceeds the national average. No measures, however, are envisaged to compensate for wage reductions due to shorter working hours or time off.

Luxembourg

Employment features of construction sector

Very few of those working in the construction sector in Luxembourg are self-employed or temporary agency workers. Workers on permanent contracts of employment comprise over 88% of the sector’s total workforce. Small enterprises are less prominent than in other countries and medium-sized and large companies account for over half of employment in construction.

Recent developments

A slight reduction in production in the second half of 2008 affected both building and civil engineering. Employment increased slightly during the year, although new orders fell sharply by 48% in the last quarter.

Although Luxembourg has managed to avoid falling into recession in 2008, indicators suggest a deterioration of conditions during 2009. House prices are starting to level out and even fall, and banks have imposed restrictions on lending. The adverse consequences of the economic slowdown on employment are likely to become more pronounced in the course of 2009.

Policy responses of government to developments

To prevent those affected by job cuts from becoming unemployed, the government has introduced a job retention plan, negotiated with worker representatives and involving measures such as partial unemployment, reduction of working hours and the temporary lending of workers.

Malta

Employment features of construction sector

A relatively large proportion of the workforce in the construction sector in Malta are self-employed, most of them (25% of the total employed) without employees. At the same time, according to the LFS, no-one is employed in the sector on a fixed-term employment contract.

Recent developments

The latest available data provide little evidence of any downturn in production in the construction sector – data are available only up to the third quarter of 2008. However, there is some evidence of a fall in employment in the second half of 2008 – the number employed was almost 3% less in the third quarter of 2008 than a year earlier.

Signs of a downturn are evident in certain parts of the sector – for example, reports suggest that a large urban regeneration project to convert abandoned buildings into apartments has been put on hold. Reports also reveal that new orders for construction work have slowed down.

Policy responses of companies to developments

Companies in the construction sector remain uncertain about whether the downturn will prove to be a short-term phenomenon or persist for a longer period, although the majority consider that it will last at least 12 months. Some employers have responded by laying off workers temporarily and/or suspending or not renewing contracts with self-employed workers and temporary agency workers. To date, relatively few employees with permanent employment contracts have been made redundant.

Policy responses of government to developments

The government has not made a direct policy response to counteract the downturn in the construction sector. A general perception remains that the sector is experiencing shortages of skilled labour and that a number of EU-funded programmes are in the pipeline to train unemployed people to become, for example, bricklayers, plasterers or stone masons.

No special income support measures have been introduced for those affected by the economic recession and no support measures are available for workers whose hours have been reduced or who have been temporarily laid off.

Austria

Employment features of construction sector

A relatively large proportion of construction workers in Austria (almost 19%) are under 25 years of age and relatively few are aged 55 years or over (less than 9%). A significantly smaller number of those working in the sector are self-employed (under 10% of the total), the majority of whom, unlike in most other countries, have employees. While about 11% of employees have temporary employment contracts, over 80% of the workforce have permanent contracts. The average size of companies in the sector, as suggested by the figures on self-employment, is larger than the EU average. In addition, just over 38% of employment is in large and medium-sized enterprises employing 50 or more employees, compared with 27% in the EU as a whole.

Recent developments

Surveys of employers in the first half of 2008 show that most of them foresaw a substantial economic downturn in the fourth quarter of the year. As a result, output was down by only 1% compared with a year earlier and there was no sign of a fall-off in orders.

Employment was some 1.5% lower in the fourth quarter of 2008 than in the same quarter of 2007. Moreover, the increase in unemployment among construction workers in the year up to January 2009 was less than in the rest of the economy. The contraction in both output and jobs was, therefore, still to come at the beginning of 2009.

Policy responses of companies to recent developments

Signs emerged in the first few months of 2009 that large companies in the construction sector are likely to respond to a downturn by introducing short-time working arrangements, temporary layoffs and the non-renewal of contracts of temporary agency workers. Since November 2008, several cases of restructuring have occurred among large companies, such as Doka, which laid off about 500 temporary agency workers in the autumn of 2008 and is planning to reduce its permanent staff by 190 workers. The remaining 1,000 employees approximately have been put on short-time working for at least three months from March 2009.

Migrants make up a substantial proportion of building workers on construction sites, many of them on temporary employment contracts. Furthermore, they are likely to be the first to be made redundant if cuts in employment are made.

Policy responses of government to developments

In November 2008, the main political parties agreed on financial support for the installation of new heating systems in buildings, amounting to an additional €100 million a year, while the social partners have called for an additional €1 billion a year. In addition, the government-owned Federal Real Estate Company (Bundesimmobiliengesellschaft, BIG), which owns and lets premises for schools, universities, ministries and other public institutions, plans to accelerate planned investments worth €875 million over the next two years. BIG also plans to accelerate investment in Austria’s power supply distribution system.

The government is currently introducing a special re-employment scheme for temporary agency workers, while under the short-time working scheme, employers are eligible for a special subsidy (Kurzarbeitshilfe) to offset part of the loss of pay suffered by employees.

Poland

Employment features of construction sector

While there are fewer self-employed workers without employees in the construction sector in Poland than the EU average, a substantial proportion of employees have temporary employment contracts, so that only 45% of the total workforce have permanent contracts. Small companies with fewer than 50 employees account for a slightly smaller share of employment than in the rest of the EU. However, micro-sized enterprises with fewer than 10 employees are responsible for over 52% of employment in the sector.

Recent developments

There is little sign of a downturn in the level of production in the sector, which was higher in the fourth quarter of 2008 than a year earlier. Employment was also some 6% higher. New orders, however, fell sharply in the last quarter of 2008, by around a third compared with the same quarter in 2007, with the situation worsening month by month. In January 2009, companies expected a much larger fall in orders than they did a month before. As a result, estimates suggested that the sector was working at only 77% capacity, reflecting the lowest level since April 2006, with SMEs being particularly affected – large companies were estimated to be working at 84% capacity.

Policy responses of companies to recent developments

Up to the first few months of 2009, no cases were reported of large-scale job losses in the construction sector.

Policy responses of government to developments

As of the beginning of 2009, the Polish government had not introduced specific support measures for the construction sector. However, in November 2008, it had adopted the ‘Plan for stability and development’, which is a stimulus package with increased availability of loans for businesses, support for financial institutions, an improved system of guarantees for SMEs and an acceleration of investment co-funded by the EU.

No benefits have been introduced, however, to provide income support for employees whose working time is reduced or who are laid off for a temporary period.

Portugal

Employment features of construction sector

The relative number of self-employed in the construction sector in Portugal is slightly lower than the EU average, especially the number of those without employees. On the other hand, the relative number of employees with temporary employment contracts is well above average, with the result that under 55% of those working in the sector have permanent employment contracts. The share of employment in micro-sized enterprises with fewer than 10 employees is slightly larger than elsewhere and the share of employment in large companies is slightly smaller.

Recent developments

The construction sector has been in a depression for some time, with output in 2008 being some 25% less than at the beginning of the decade. Moreover, output continued to be low throughout 2008 and at the end of the year was some 4% lower than a year earlier. The decline in output was concentrated in the housing sector, while there was some increase in the construction of non-residential buildings and in civil engineering projects.

Employment was also much lower in 2008 than it was eight years earlier (around 20% lower). At the end of the year, employment was some 3% below the level at the end of 2007.

New orders fell substantially in the last quarter of 2008 – by almost 40% compared with a year earlier – signalling a sharp decline in output during 2009.

The downturn in the construction sector has affected suppliers of materials, with sales of cement, for example, declining by almost 7% between 2007 and 2008.

Policy responses of government to developments

The government budget for 2009 includes measures to support investment, including projects such as a new international airport, a TGV high-speed rail link to the rest of Europe and expenditure on energy and new technologies.

Two measures have been introduced to support restructuring and the people affected by the downturn in the construction sector. The first measure aims to reduce the impact on jobs, and the second provides support in the form of retraining for the workers losing their jobs, or at risk of being laid off, helping them to in set up their own company and assisting them in relocating to another area.

Workers who have been laid off for a temporary period are not eligible for unemployment benefits, although legally they are entitled to an income at least equal to the national minimum wage.

Slovenia

Employment features of construction sector

The share of self-employed people in the construction workforce in Slovenia is below the EU average, especially the share of those with employees. However, some 17% of employees have temporary employment contracts, which means that just over two thirds of workers in the sector have permanent contracts. The sector also has a relatively large proportion of foreign workers and their number has increased in recent years, most of them coming from other countries of the former Yugoslavia. The share of employment in small companies in the construction sector is slightly smaller than the EU average and the proportion of employment in medium-sized companies with 50 or more employees and large companies with 250 or more employees is correspondingly higher – about 35% compared with 27%.

Recent developments

Output in the sector increased significantly in both 2006 and 2007 but began to decline in the latter part of 2008. The largest increase in output was in civil engineering, as well as in the construction of buildings for non-residential purposes. The first signs of economic recession were apparent in November 2008, with output 8% lower than a year earlier. This was largely due to a reduction in non-residential building, which was some 31% lower than a year earlier.

Although employment began to fall, it was, nevertheless, some 10% higher in November 2008 than the year before. The reduction of economic activity is expected to continue, with the stock of contracts in November being 11% lower than in November 2007 and an increasing number of companies reporting insufficient demand as the main factor limiting production, the indicator reaching a six-year high at the turn of the year.

In addition to the contraction of building, civil engineering has also showed a decline following the completion of several large sections of motorway in 2008.

Production in mining and quarrying and in the manufacture of wood and non-metallic mineral products industries, which are all industries strongly linked with construction, declined during 2008.

Policy responses of companies to developments

Although there was some fall in employment during 2008, no large-scale cases of restructuring in the sector have so far been reported. However, since migrant workers constitute a large part of the workforce and many of these are on fixed-term employment contracts, they are likely to be hit first by a reduction in employment in the sector.

Policy responses of government to developments

No specific measures have been taken by government to aid the construction sector. Although plans to speed up the construction and modernisation of rail infrastructure will help in the future, this is not expected to have an effect before 2010.

A number of companies have used the Slovenian system known as ‘sending workers on waiting’, which means that workers are given leave for a period of time because of insufficient work, as output has declined. From February 2009, the government will partly cover the costs of social security contributions of those companies that are forced to temporarily reduce working time.

Slovakia

Employment features of construction sector

Although a relatively small number of employees in the construction sector in Slovakia are on fixed-term employment contracts, a relatively large proportion of the workforce comprises self-employed workers without any employees – around 32% of the total. As a result, just under 60% of the workforce have permanent employment contracts.

Small companies are less prominent in the sector than in other countries and over half of employment is in medium-sized and large enterprises, which is almost twice the EU average.

Recent developments

The level of output of the sector has increased almost continuously since the latter part of the 1990s and in 2008 was some 80% higher than in 2000. There is little evidence up to the end of 2008 of any downturn in the sector. Employment has increased along with output and was around 40% higher in 2008 than eight years earlier and 11% higher at the end of 2008 than at the end of 2007.

The immediate prospects, as reflected in new orders, are for continuing growth at least up until mid 2009. It is expected that any downturn will mainly hit the building of new offices and business centres, whereas refurbishing of old buildings is unlikely to be significantly affected. Work on a number of development projects was, therefore, temporarily suspended towards the end of 2008 and the start of new projects delayed.

In 2009, the main growth will be in public investment, which might compensate for a decline in the private sector. Already in the first month or two of the year, redundancies have been announced in a few companies supplying the construction sector and one major multinational company has temporarily halted production.

It also appears that some of the many Slovaks working in the construction sector abroad – amounting to 51,600 people in 2007 – are returning home as the recession takes hold.

Policy responses of companies to developments

Although, as of the beginning of 2009, there was no significant downturn in the construction sector in Slovakia, some companies have suspended work contracts with self-employed workers and have not renewed the employment contracts of temporary staff. In addition, a number of companies have temporarily laid off workers and have reduced their wages to 60% of the normal level, as prescribed by legislation.

Policy responses of government to developments

The Slovakian government has adopted a package of provisional measures to counteract the economic crisis, including the extension of public construction programmes, some of them co-financed by the EU Structural Funds.

Although employees made redundant are entitled to unemployment benefits, those laid off for a temporary period do not qualify for benefits. Likewise, no income support is available for employees whose working hours have been reduced, although some collective agreements might in certain cases allow for entitlement to some compensation.

Finland

Employment features of construction sector

The division of employment in the construction sector in Finland between self-employed workers and employees as well as between those with permanent employment contracts and those with fixed-term ones is roughly in line with that in other EU countries taken together. The size distribution of companies in Finland is also similar, although the level of employment in large companies with 250 or more employees is higher than the EU average (20% compared with 12%).

Recent developments

Signs have emerged during 2008 of some contraction in the sector. In the third quarter of 2008, only 5,265 building permits were granted compared with 8,099 such permits two years earlier. In the same quarter, residential building starts were 25% lower than in the year before and the number of completed buildings was down by 10%.

According to estimates, about 4,500 new registrations of construction workers were added to the unemployment register in January 2009, over twice the number recorded in January 2008, reflecting the suspension of construction projects due to the crisis. At the same time, some foreign real estate investors have withdrawn from a number of ongoing construction projects.

According to forecasts, employment in the sector in 2009 will fall by some 23% (affecting around 46,000 workers), with both small and large enterprises being affected.

Policy responses of companies to developments

The downturn in construction was accompanied by some 4,959 workers being made redundant in the last three months of 2008, which was seven times more workers than in the same month in 2007. In January 2009, as many as 2,118 workers lost their jobs, 60% more than a year earlier and 10 times more than in January 2007. In addition, there is evidence of more companies negotiating with workers over restructuring, including over temporary layoffs as well as redundancies. In the last three months of 2008, some 47,797 workers were involved in such ‘cooperation negotiations’ compared with 9,892 workers over the same period in 2007. In January 2009, the number had escalated to 29,924 workers compared with only 2,481 workers one year earlier.

Moreover, according to the largest temporary agency employment company in Finland, Varamiespalvelu, the use of agency workers in construction has fallen sharply, by 25% in the last quarter of 2008 compared with the same quarter in 2007.

Some notable restructuring cases have also emerged, including the following: the Finnish construction company YIT, which began cooperation negotiations to cut 350 jobs in November 2008; two Swedish companies, Skanska and NCC, which are planning to cut a total of some 900 jobs; and the Finnish consulting and engineering company, Pöyry, which is planning restructuring measures involving 250 employees.

Policy responses of government to developments

As well as support for the financial services sector, the household service tax allowance, which applies in particular to the repair and renovation of homes, was increased in January 2009 to a maximum of €3,000 per person. In addition, some €1.3 billion of a support package amounting to €2 billion is earmarked for construction projects, €700 million allocated for civil engineering and €600 million for building, including school repairs and subsidies for housing renovations.

Increased payments to employees made redundant after more than three years working with the same employer have been introduced in addition to normal unemployment benefits. The latter can be claimed by those workers who have been temporarily laid off as well as by those losing their jobs for up to 500 working days.

Sweden

Employment features of construction sector

A larger proportion of the workforce in Sweden’s construction sector are aged 55 years or over (21%) than in any other EU country under review. The relative number of self-employed workers, however, is lower than the EU average, which is also the case for the share of temporary workers. Moreover, the proportion of the workforce with permanent employment contracts is also higher than the EU average at just over 70%. The share of workers employed in small enterprises in the sector is below average and some 22% of all of those in employment work in large companies.

Recent developments

Up until the end of 2008, little signs were evident of a downturn in either output or employment in the construction sector. There was, however, a sharp fall in new orders in the last quarter of the year, which were down by over 30% compared with the same period in 2007, signifying a widely expected reduction of output in the sector. Indeed, housing construction has already declined significantly, as at the beginning of 2009, and commercial building is expected to show a large decline during the year.

The evidence suggests that unemployment among construction workers has increased mostly in the case of young trainees, although there has also been a decline in demand for consultants.

Policy responses of companies to developments

A widespread tendency up to the beginning of 2009 among companies in response to the weakening market was to ‘wait and see’ how the situation would unfold. However, since employers in Sweden are prohibited by law to lay off workers temporarily without giving them the same pay and fringe benefits as other workers, this restricts the action that companies can take.

During the last quarter of 2008, several Swedish companies in the construction sector, many of them manufacturers of prefabricated buildings, undertook large-scale restructuring.

Policy responses of government to developments

The Swedish government has introduced a number of measures to support the construction sector, including the introduction of a tax reduction on the repair, maintenance, extension and modification of certain buildings, as well as increased expenditure on infrastructure, mainly on road and rail networks, amounting to around €785 million,

Specific labour market measures are being developed in response to the decline in the sector. Moreover, special income support measures are being made available to workers losing their jobs as long as they are members of the unemployment insurance fund.

UK

Employment features of construction sector

Although only a small number of employees are on fixed-term employment contracts in the UK construction sector, a large share of the workforce – almost a third of the total – consists of self-employed workers without employees who work for companies on a contractual basis and who are equivalent to employees but often without the same level of protection. Companies in the sector tend to be larger than the EU average and, as in Sweden, large companies account for about 22% of employment in the sector compared with the EU average of 12%.

Tens of thousands of migrants from central and eastern European countries have entered the UK construction sector in recent years, particularly since the entry of the new Member States to the EU in 2004 and 2007, which has put downward pressure on the terms and conditions of employment.

Recent developments

Few signs emerged of any downturn in either output or employment in construction throughout 2008, although this conceals divergent trends in different sectors of the market, with house building declining significantly, offset by an expansion of civil engineering. Moreover, the number of new orders declined sharply in the second half of the year, which led to the number of orders in the last quarter of 2008 being more than 25% lower than a year earlier.

The construction of new houses was, therefore, some 30% lower in the third quarter of 2008 than in the same quarter of 2007, which reflected a fall in house prices of about 9% over the 11 months to July 2008. Non-residential building also declined by over 20%, whereas public sector construction continued to increase (up by 25%).

Reports have emerged of a number of construction projects left incomplete. In July 2008, a large residential project in Leeds in West Yorkshire in the north of England, with a total investment of around €200 million, was abandoned because of a lack of demand. A similar development in Cardiff in southern Wales, worth some €400 million, was suspended for the same reason.

Medium-sized companies seem more affected by the downturn than smaller ones. In the third quarter of 2008, 26% of redundancies in construction occurred in enterprises employing fewer than 20 workers, which accounted for 50% of employment, while 45% occurred in companies employing 50–249 workers, which accounted for 16% of employment.

Young people working in the sector appear to have been hit particularly hard. Some 53% of the redundancies announced in the third quarter of 2008 were among those aged under 30 years, which amounted to twice their share of employment.

Policy responses of companies to developments

Companies in the sector have generally responded to the downturn through redundancies. However, there have not been many cases of large company restructuring, reflecting the small average size of companies in the sector.

Some evidence has emerged of a decline in temporary employment, with the share of employees on fixed-term employment contracts declining from 4.1% of the total in the third quarter of 2007 to 2.8% a year later. While it is thought that a significant number of migrant workers have returned home as a result of the downturn, not much concrete evidence of this exists to date.

Policy responses of government to developments

In November 2008, the government announced around €3.5 billion of extra capital spending on infrastructure.

As of February 2009, no new initiatives had been introduced to support workers losing their jobs. Income support is available to workers who have been temporarily laid of as well as to those whose working hours have been reduced significantly – although reduced hours means to below 16 hours a week which is unlikely to apply to many workers. Moreover, such support is means-tested, which means that those with savings above a certain amount are not eligible for benefits.

Norway

Employment features of construction sector

The workforce in the construction sector in Norway consists of more young people aged under 25 years than in most other countries. Therefore, young people make up just over 19% of the total workforce in the sector, which is higher than in any other EU Member State apart from Ireland. Moreover, Norway also has an above-average proportion of older people aged 55 years or more working in the sector. In addition, the number of self-employed workers is relatively small, amounting to only 16% of total employees. Moreover, a smaller number of employees have fixed-term employment contracts compared with other countries, which means that a large majority of workers (77%) have permanent employment contracts. This, however, may well be an overestimation of the number involved, since many migrants are employed on fixed-term contracts and these are under-recorded in the official statistics. The size distribution of companies is similar to the EU average, although a slightly larger share of employment is in large enterprises with 250 or more employees.

Recent developments

Output in construction increased relatively continuously up to the last quarter of 2008, when it declined again to the level of a year earlier. Employment also fell slightly. The decline was strongest in the new buildings sector, especially in residential construction. The largest decline, however, was in new orders, which were 31% lower in the last quarter of 2008 than in the same quarter of 2007.

Forecasts suggest a substantial downturn in the economy as whole in 2009, with construction being hit hardest. New housing construction, in particular, is expected to decline by 12% in 2009 after an estimated fall of 9% in 2008. Employment in the sector, as a result, is forecast to decline by about 15% in 2009. Polish migrants, which make up a significant part of the construction workforce, are expected to be hit especially hard.

Policy responses of companies to developments

Several companies had announced or had already implemented a downsizing of their workforce as of the beginning of 2009. A notable example is Skanska, a major global construction company, which announced a planned cut of around 3,400 jobs in the Nordic countries, affecting about 16%–17% of its total employees, with up to 800 jobs to be lost in Norway.

Figures suggest that more migrant workers have been affected by unemployment than Norwegians. Moreover, there was also a decline in the number of work permits issued to workers from the new EU Member States in the year up to the last quarter of 2008.

Policy responses of government to developments

In January 2009, the Norwegian government announced measures to increase expenditure on public maintenance works and on the national road and rail network amounting to about €750 million. In addition, municipal budgets were increased by some €725 million, €450 million of which will be earmarked for the maintenance of public buildings, and an extra €320 million was allocated to new government-initiated construction projects.

The rules applying to layoffs have been modified, with the period during which employers have to pay a wage compensation being reduced from 10 to five days and the period during which employees are entitled to benefits being extended from 30 to 52 weeks. These provisions make it easier for companies to resort to temporary layoffs instead of having to make workers redundant.

Funds have also been set aside for 6,000 new on-the-job training places. The Labour Inspectorate (Arbeidstilsynet) has been allocated an extra €570,000 to combat social dumping where employers are paying below the minimum wage and extra funds have also been allocated to projects for integrating migrants into the labour market.

Workers who have had their working hours permanently reduced and those who have been laid off temporarily are entitled to unemployment benefits, as long as working hours and income have been cut by at least half.

Annex: Data tables







Table A1: Distribution of employment in construction, by country and occupation, 2007 (%)
 

Managers

Architects, engineers and related professionals

Other professionals and technicians

Clerks

Building frame and related trades workers

Building finishers and related trades workers

BE

10.0

11.6

3.3

5.6

26.2

18.9

BG

6.3

5.6

2.4

2.8

31.6

9.4

CZ

6.0

13.2

6.5

2.2

31.3

18.6

DK

7.7

5.2

4.1

3.6

31.4

20.1

DE

4.0

9.3

2.8

8.7

18.7

28.7

EE

15.0

2.5

6.3

0.0

37.5

15.0

IE

4.7

6.1

1.1

2.9

32.0

22.7

EL

4.8

1.8

0.3

0.8

31.2

33.2

ES

5.4

3.0

3.8

3.3

35.5

17.1

FR

4.5

8.4

3.6

4.9

29.3

17.8

IT

6.2

5.3

3.7

3.2

34.0

23.4

CY

2.2

6.7

2.2

6.7

40.0

11.1

LV

10.5

3.2

5.6

1.6

39.5

4.0

LT

10.1

3.6

4.1

0.6

31.4

11.8

LU

6.3

6.3

0.0

12.5

25.0

18.8

HU

8.5

5.5

2.4

3.0

24.6

21.0

MT

9.1

9.1

0.0

0.0

18.2

27.3

NL

11.0

10.0

4.5

6.7

29.5

18.9

AT

8.0

8.3

5.5

8.0

17.1

23.5

PL

10.2

6.0

3.6

1.8

25.8

24.4

PT

6.7

4.0

1.2

3.7

41.6

12.5

RO

3.1

10.0

4.6

2.4

28.7

9.5

SI

7.0

12.3

5.3

5.3

19.3

15.8

SK

4.7

5.5

4.2

1.7

35.6

16.1

FI

13.7

10.3

2.9

2.9

27.4

14.9

SE

4.6

8.2

5.3

3.6

32.7

18.5

UK

12.9

6.4

3.2

6.4

23.2

22.3

NO

4.6

4.0

3.5

3.5

37.6

8.1

Total

7.0

6.6

3.5

4.6

28.7

20.5

Notes: See Annex 2 for a list of country codes.

Source: Eurostat, LFS







Table A1 (cont.): Distribution of employment in construction, by country and occupation, 2007 (%)
 

Painters and related trades workers

Electrical equipment mechanics and fitters

Other craft and related trades workers

Motor vehicle drivers and other mobile plant operators

Other plant and machine operators and assemblers

Elementary jobs

BE

4.7

1.3

3.7

5.3

1.3

8.0

BG

2.8

1.7

4.5

8.3

1.7

22.9

CZ

3.4

2.7

5.1

6.3

1.1

3.6

DK

6.2

3.1

2.6

3.6

1.0

11.3

DE

7.9

1.4

6.8

5.7

1.2

5.0

EE

7.5

0.0

3.8

6.3

0.0

6.3

IE

4.3

0.4

4.0

6.1

0.4

15.5

EL

11.4

1.0

1.3

6.1

0.3

7.9

ES

4.9

1.4

3.0

6.9

0.8

15.0

FR

7.9

4.2

6.5

5.3

4.8

2.7

IT

6.0

1.7

3.0

5.0

0.8

7.7

CY

6.7

2.2

2.2

6.7

0.0

13.3

LV

5.6

4.0

5.6

5.6

0.8

13.7

LT

5.9

1.8

7.1

8.3

1.8

13.6

LU

6.3

0.0

0.0

6.3

0.0

18.8

HU

9.7

0.6

5.8

6.4

0.6

11.9

MT

0.0

9.1

0.0

9.1

0.0

18.2

NL

6.3

1.2

3.1

4.1

1.2

3.3

AT

5.2

2.1

6.7

5.2

1.5

8.9

PL

4.9

1.8

4.9

6.0

1.1

9.6

PT

6.1

3.7

2.6

6.1

0.2

11.6

RO

5.2

2.2

8.3

6.0

0.7

19.2

SI

5.3

1.8

8.8

10.5

1.8

7.0

SK

4.7

0.8

4.7

5.9

2.1

14.0

FI

3.4

5.7

5.1

8.6

1.1

4.0

SE

6.4

3.9

6.4

7.1

1.1

2.1

UK

5.5

1.1

2.5

2.7

0.6

13.2

NO

2.9

17.3

5.2

10.4

0.0

2.9

Total

6.1

2.1

4.5

5.6

1.3

9.6

Notes: See Annex 2 for a list of country codes.

Source: Eurostat, LFS









Table A2: Quarterly index of production in construction, by country, 2005–2006
 

2005Q01

2005Q02

2005Q03

2005Q04

2006Q01

2006Q02

2006Q03

2006Q04

BE

97.8

102.8

102.1

101.1

101.8

103.57

104.2

108.6

BG

92.0

96.4

102.1

109.1

109.7

122.18

129.8

134.2

CZ

98.3

98.3

100.2

103.2

98.9

105.17

109.3

110.3

DK

97.6

100.3

98.9

103.2

103.9

109.71

117.7

108.3

DE

95.5

99.7

100.1

102.6

94.6

106.81

108.9

112.9

EE

88.8

94.5

104.4

109.7

114.4

129.54

132.9

132.0

IE

90.9

99.4

106.6

100.9

106.4

96.68

94.7

103.0

EL

105.3

96.8

99.7

100.4

103.8

104.42

108.7

114.8

ES

94.7

97.3

99.9

101.4

100.1

102.02

102.1

101.7

FR

97.1

98.5

101.3

101.3

100.5

103.51

103.8

105.8

IT

-

-

-

-

-

-

-

-

CY

97.5

97.4

101.6

103.4

102.2

103.51

103.2

107.1

LV

94.6

97.8

101.5

105.3

108.7

112.22

115.8

119.9

LT

93.6

97.0

101.1

105.1

109.6

117.21

126.1

135.6

LU

97.5

99.9

99.0

102.3

95.8

102.15

105.2

107.6

HU

92.6

101.0

104.6

101.0

101.3

94.08

101.4

100.0

MT

97.8

99.1

100.5

102.7

106.7

108.26

113.4

112.6

NL

-

-

-

-

-

-

-

-

AT

93.7

100.4

100.7

105.2

100.7

104.38

109.0

110.7

PL

102.0

100.5

101.1

96.3

103.6

112.71

119.5

127.6

PT

101.2

100.4

100.2

98.3

96.8

94.14

92.4

90.5

RO

91.7

91.1

95.8

111.4

106.2

105.89

118.2

121.1

SI

98.8

102.8

101.2

101.2

96.6

106.6

117.8

136.0

SK

91.6

97.8

101.1

104.8

104.2

113.57

118.7

120.9

FI

95.4

99.3

101.2

103.1

103.6

104.03

108.5

113.4

SE

98.9

99.6

100.9

102.1

102.9

110.85

111.1

111.5

UK

100.2

100.7

99.5

99.5

100.5

100.63

101.6

102.4

NO

96.9

99.8

100.2

102.9

104.0

105.35

106.3

108.7

EU27

97.5

99.5

100.8

101.9

99.9

102.73

104.3

107.8

Notes: Construction = NACE 45, where NACE (Nomenclature générale des activités économiques dans les Communautés européennes) is the general industrial classification of economic activities within the European Communities.

Data are seasonally adjusted (2005=100). See Annex 2 for a list of country codes.

Source: Eurostat, Short-term indicators









Table A2 (cont.): Quarterly index of production in construction, by country, 2007–2008
 

2007Q01

2007Q02

2007Q03

2007Q04

2008Q01

2008Q02

2008Q03

2008Q04

BE

109.5

104.9

105.2

108.23

107.2

107.6

105.5

99.0

BG

156.0

154.7

158.1

163.89

153.3

154.2

153.5

151.2

CZ

122.6

116.0

111.0

115.25

121.5

114.4

116.0

111.2

DK

114.2

114.4

113.5

113.58

111.2

111.5

109.5

110.1

DE

114.3

106.0

106.3

108.9

116.9

104.8

104.7

106.4

EE

145.2

143.4

145.7

148.75

138.9

133.7

124.4

120.7

IE

95.6

95.5

88.3

84.42

73.8

70.6

67.3

62.1

EL

128.3

129.5

136.1

137.34

135.7

138.6

138.5

136.4

ES

100.5

99.4

96.9

93.86

88.2

84.2

80.8

77.3

FR

105.7

106.3

106.8

107.54

109.2

107.1

106.4

105.2

IT

-

-

-

-

-

-

-

-

CY

106.7

110.1

111.6

114.53

115.2

114.3

114.2

110.7

LV

124.7

128.3

132.2

133.21

136.2

131.3

122.1

111.7

LT

144.8

150.1

153.2

156.97

162.1

157.0

148.5

135.5

LU

109.8

104.5

104.3

103.68

106.6

105.6

102.4

103.1

HU

96.9

86.0

80.7

77.69

80.9

81.9

77.5

78.7

MT

109.9

109.6

109.7

111.58

111.4

112.9

113.2

114.1

NL

-

-

-

-

-

-

-

-

AT

111.5

111.5

111.4

109.43

113.9

110.0

107.9

108.2

PL

131.7

129.3

135.8

144.04

145.2

150.6

148.4

149.4

PT

90.2

89.9

89.5

89.91

89.4

88.8

88.6

87.8

RO

132.4

139.2

152.4

171.49

180.8

194.9

194.2

196.3

SI

139.0

141.9

137.5

135.19

185.7

166.0

158.3

139.9

SK

125.2

122.2

121.9

119.46

140.6

134.4

133.9

135.9

FI

116.8

118.6

118.0

123.15

128.0

127.2

126.7

118.7

SE

112.2

113.3

123.6

118.73

121.7

124.5

126.5

127.9

UK

102.7

103.6

103.9

105

106.2

105.5

104.0

97.3

NO

112.5

110.4

112.4

112.93

112.7

116.4

117.7

-

EU27

106.7

105.5

105.8

107.5

107.7

103.6

102.6

99.7

Note: Data are seasonally adjusted (2005=100). See Annex 2 for a list of country codes.

Source: Eurostat, Short-term indicators









Table A3: Quarterly index of employment (‘000s) in construction, by country, 2005–2006
 

2005Q01

2005Q02

2005Q03

2005Q04

2006Q01

2006Q02

2006Q03

2006Q04

BE

102.6

103.5

103.2

104.5

106.0

107.49

108.3

109.3

BG

140.0

142.7

150.7

155.5

160.4

165.37

173.5

179.0

CZ

97.3

97.9

98.4

98.6

98.4

98.67

98.4

98.2

DK

96.0

96.6

97.6

99.5

94.2

103.14

108.8

104.7

DE

69.5

68.6

67.9

67.5

66.8

67.86

68.2

68.4

EE

124.8

127.7

132.2

136.3

138.8

146.23

152.6

159.3

IE

106.0

106.4

107.2

107.9

108.5

109.34

109.8

110.2

EL

83.1

79.7

81.6

84.4

84.2

87.86

97.9

100.9

ES

133.5

135.3

138.0

140.9

142.9

145.82

149.5

152.7

FR

108.1

109.0

110.0

111.3

112.6

113.88

115.1

116.4

IT

-

-

-

-

-

-

-

-

CY

127.7

128.5

130.6

131.4

133.3

134.34

135.6

137.7

LV

134.7

138.8

145.3

153.0

157.5

161.06

168.4

178.1

LT

131.1

132.5

134.8

139.4

141.3

145.97

150.0

155.5

LU

108.6

109.3

109.5

110.1

110.1

110.7

111.4

110.9

HU

111.7

112.8

115.0

117.1

119.1

121.78

122.1

123.5

MT

108.4

104.5

104.0

104.1

106.8

109.75

109.3

110.1

NL

95.7

96.1

96.6

97.0

98.4

98.81

99.5

100.0

AT

93.7

93.5

93.1

93.1

92.5

93.51

94.2

94.8

PL

62.5

62.6

62.8

63.1

63.6

65.18

66.5

67.7

PT

90.6

89.9

89.1

87.5

86.3

84.61

83.0

82.2

RO

104.1

107.6

108.7

109.7

103.9

106.88

110.4

113.3

SI

99.5

101.3

103.0

103.9

105.1

108.18

111.1

114.0

SK

109.8

112.3

114.7

117.1

121.2

122.65

125.1

126.8

FI

104.6

104.6

106.6

108.8

106.6

108.74

108.9

112.0

SE

101.6

101.3

102.5

102.7

104.8

108.12

111.3

113.5

UK

104.8

104.0

106.0

106.0

107.9

110.12

110.2

111.1

NO

117.9

119.1

120.7

122.2

126.4

128.5

131.1

133.7

EU27

102.3

102.7

103.4

104.2

105.0

106.67

108.2

109.8

Note: Data are seasonally adjusted (2005=100). See Annex 2 for a list of country codes.

Source: Eurostat, Short-term indicators









Table A3 (cont.): Quarterly index of employment (‘000s) in construction, by country, 2007–2008
 

2007Q01

2007Q02

2007Q03

2007Q04

2008Q01

2008Q02

2008Q03

2008Q04

BE

110.3

111.0

111.8

113.47

113.5

113.3

114.9

113.7

BG

186.3

187.2

184.8

193.85

196.8

199.3

200.9

196.9

CZ

97.5

97.2

96.8

96.54

96.9

96.4

96.2

96.1

DK

110.3

109.3

107.6

109.05

107.6

104.9

104.5

103.0

DE

68.9

68.1

67.9

67.8

67.8

67.4

67.1

66.8

EE

170.1

171.8

174.9

176.81

179.2

178.2

173.3

-

IE

110.0

108.8

106.8

103.61

98.4

93.2

87.9

82.9

EL

92.1

91.0

82.1

82.5

99.8

108.8

115.2

124.0

ES

156.3

156.9

156.7

156.59

153.3

144.2

135.6

124.4

FR

117.6

118.9

120.1

121.25

122.2

122.6

123.0

122.9

IT

-

-

-

-

-

-

-

-

CY

139.3

141.3

143.6

147.08

147.3

146.9

147.0

146.0

LV

204.0

213.6

218.2

224.82

216.6

219.2

220.1

212.4

LT

166.4

171.8

178.4

179.8

183.3

185.1

187.0

:

LU

111.3

111.1

111.2

111.96

112.4

112.6

112.8

113.0

HU

117.0

114.6

111.8

108.47

110.8

106.9

103.9

103.4

MT

97.9

102.3

104.9

108.25

113.4

108.6

107.7

104.8

NL

100.1

100.2

100.4

100.57

100.6

100.9

101.0

:

AT

95.7

95.6

95.5

95.31

95.2

94.6

94.2

93.9

PL

69.0

70.2

71.1

72.25

75.2

75.4

75.9

76.7

PT

81.2

80.6

80.5

80.33

80.5

79.5

79.0

77.8

RO

122.7

121.9

122.2

123.77

134.7

132.7

130.6

129.0

SI

116.9

120.0

123.7

127.74

132.0

134.7

137.8

-

SK

128.6

130.4

132.0

134.4

137.9

141.3

144.9

149.0

FI

113.2

114.5

119.5

120.41

123.2

124.2

123.4

122.1

SE

115.4

117.6

118.4

121.6

122.7

121.9

122.0

121.6

UK

108.5

110.4

113.1

112.44

113.9

113.8

114.9

-

NO

137.9

141.5

144.5

147.32

146.0

147.8

149.5

148.9

EU27

111.4

112.5

113.2

113.74

113.7

112.7

111.8

110.3

Note: Data are seasonally adjusted (2005=100). See Annex 2 for a list of country codes.

Source: Eurostat, Short-term indicators













Table A4: Quarterly index of new orders for buildings and civil engineering, by country, 2006–2008
 

2006Q01

2006Q02

2006Q03

2006Q04

2007Q01

2007Q02

2007Q03

2007Q04

2008Q01

2008Q02

2008Q03

2008Q04

BE

90.7

94.6

98.5

98.0

105.7

116.0

113.5

117.1

131.6

138.5

122.8

133.9

DE

74.4

78.7

79.0

77.3

84.0

82.8

81.5

88.7

88.1

85.6

84.9

77.4

FR

160.9

162.1

165.9

177.5

181.0

184.0

189.0

192.5

190.9

188.3

185.4

176.4

LV

299.8

292.4

330.4

400.6

389.9

366.6

389.8

451.3

401.7

361.1

348.2

-

LT

382.8

410.6

446.4

473.9

504.9

540.9

574.3

578.7

573.2

551.6

525.7

-

LU

149.7

114.6

104.3

153.5

144.0

144.6

116.6

139.2

117.5

125.9

175.8

71.8

HU

160.4

126.6

119.4

107.3

98.1

118.7

108.2

126.4

103.2

91.2

107.8

100.0

AT

130.7

125.3

132.0

131.1

142.0

145.7

135.8

139.5

142.2

144.0

145.9

145.6

PL

185.1

110.9

161.5

172.6

181.9

208.4

194.5

227.5

212.9

227.9

203.6

151.0

PT

99.0

99.0

98.1

100.0

87.1

80.6

80.4

95.4

96.0

84.6

104.3

58.0

SI

212.8

250.4

232.0

185.5

176.2

245.8

232.7

229.2

277.6

219.5

213.7

222.7

SK

256.9

244.3

279.5

242.6

280.0

323.7

264.3

296.7

315.1

282.3

369.5

-

SE

156.7

179.3

160.0

217.0

153.9

193.9

189.4

216.5

224.7

184.8

182.5

150.3

UK

118.6

124.1

118.3

115.2

119.5

131.6

115.5

119.7

114.5

105.2

97.6

89.2

NO

200.8

183.3

197.5

209.8

231.1

219.5

201.7

231.7

200.7

190.9

197.1

159.1

EU27

124.2

122.7

124.6

131.6

135.0

140.5

134.6

142.2

141.1

135.5

134.7

121.8

Note: Data are seasonally adjusted (2000=100). Data are only available for 14 of the EU27 Member States and Norway. See Annex 2 for a list of country codes.

Source: Eurostat, Short-term indicators

Annex 2: Country codes


Country groups
EU15

15 EU Member States prior to enlargement in 2004 (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom (UK))

NMS

12 New Member States, 10 of which joined the EU in 2004 (Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia) and the remaining two in 2007 (Bulgaria and Romania)

EU27

27 EU Member States


Country codes

Country code

Country name

AT

Austria

BE

Belgium

BG

Bulgaria

CY

Cyprus

CZ

Czech Republic

DE

Germany

DK

Denmark

EE

Estonia

EL

Greece

ES

Spain

FI

Finland

FR

France

HU

Hungary

IE

Ireland

IT

Italy

LT

Lithuania

LU

Luxembourg

LV

Latvia

MT

Malta

NL

Netherlands

NO

Norway, part of the ERM network

PL

Poland

PT

Portugal

RO

Romania

SE

Sweden

SI

Slovenia

SK

Slovakia

UK

United Kingdom

AT

Austria

Terry Ward and Duncan Coughtrie, Applica sprl

EF/09/48/EN

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