Europe has experienced diverse COVID-19 impacts, with total shutdowns in Spain and Italy while other countries “more-or-less continued normally,” says Domenico Campogrande, director general of FIEC, the European construction industry federation, based in Brussels.

But with some governments funding worker furlough schemes, the impact of construction employment is “not dramatic,” says Campogrande. To allow increased government spending during the crisis, the European Commission suspended mandatory borrowing limits on European Union (EU) member governments, which are 3% for budget deficits and 60% of GDP for total debt.

In east and central Europe, “countries have tried to keep their economies going as much as possible,” says Mark Rea, managing partner of cost consultant Sentient, based in Budapest, Hungary. Regional governments “don’t have fire power” to provide subsidies and grants like those available in larger economies, he says. In Poland, for example, “people in our profession had little support, if any,” says Jan Holyst, a partner in Sentient’s Warsaw office.

But government support in the east has been less needed because “as a whole, the region has come through this thing very well … the number of people getting ill has been remarkably low in comparison to countries in western Europe,” says Rea.

While the U.K., Spain and Italy have been hard hit by the virus, in Poland, “it’s very, very small scale,” says Holyst. The Polish government “reacted pretty quickly in terms of shutting things down,” he says. Projects in design or in construction continued, but planned investments were suspended. In Hungary, “I don’t know any sites shut down,” says Rea.

Before the pandemic, the east and central European market “was almost too hot,” says Rea. “Prices have been rising by double digits for the last two to three years.” Poland’s booming construction sector experienced “phenomenally” high cost rises, adds Holyst.

Generally across the continent, “even where construction continued … there are many uncertainties about the future,” says Campogrande. According to data from various FIEC member trade associations, construction output will fall by up to 35% this year in the Irish Republic and by 30% in Spain. At the other end of the scale, Germany’s construction demand is forecast to fall just 3%, while Austria and Finland expect to remain stable.

‘Green Deal’ Support

One source of support for the 27 EU states will be the region’s “green deal,” with large planned decarbonization investments, says Campogrande. “In terms of construction, there are huge opportunities,” he says. Investments in retrofitting buildings, for example, will have to triple.

But having left the EU this January, the U.K. will have limited access to these projects. The country also stands out in Europe for suffering one of the world’s highest per capita death rates linked to COVID-19. The U.K. also faces an 11% to 14% fall in GDP this year, one of the industrialized world’s largest predicted drops, according to Paris-based think tank Organisation for Economic Co-operation and Development.

Such gloomy outcomes are reflected in early results from a survey by RICS, the U.K. cost consultants institute, which “doesn’t make for very pleasant reading,” says chief economist Simon Rubinsohn. Over the next 12 months, “people are not looking at work picking up very materially.” Government promises to boost infrastructure spending might not materialize till 2021, he adds.

The U.K. government plans to launch an accelerated and visible pipeline of work to revive construction, says Fergus Harradance, deputy director of its Dept. of Business, Energy and Industrial Strategy. Accounting for 9% of the national economy and with a nationwide footprint, “there is a huge economic multiplier from investment in construction, which you don’t get in any other sector,” he adds.

Benefiting from comprehensive government support packages, the U.K. industry is “still in the artificial period,” says Andrew Beard, U.K.-based global head of cost and commercial management at Arcadis N.V. As some form of normality returns, he doubts competition for work will lead to a big drop in prices. “We believe there will be learning from the 2008 [financial] crisis when there was a bit of a race to the bottom and contractors were very keen to secure a pipeline order book,” he says.

While recovering from the pandemic, U.K. construction faces the additional potential blow of new EU trade barriers. Prime Minister Boris Johnson is seeking trade terms apparently unpalatable to EU negotiators and has vowed to walk away from talks unless he gets his preferred terms by this fall. A no-deal scenario would be “very problematic for the construction industry, [creating] significant levels of disruption,” says Harradance. “Workers currently in the U.K. could choose to leave.”

Workforce Reduction

Such an outcome would add to a potential 5% workforce reduction in the wake of COVID-19, says Beard. “That could be fairly short term, but historically, construction has not been able to bounce back,” he adds. Workforce reductions are also undermining construction sector recovery in Eastern Europe. In Poland, “a lot of Ukrainians went home, which aggravated the problem in terms of resources,” says Holyst.

Effects of labor shortages on productivity will be compounded by new measures to prevent the pandemic’s resurgence, says Campogrande. Maintaining social distancing in worker transportation and site operations is among inflationary factors that could add 10% to operating costs, he suspects.