Weakness in overall construction sector profitability: Low productivity exacerbated by labour shortages
Construction sector
Fecha: enero 2025
María José Moral
SEFO, Spanish and International Economic & Financial Outlook, V. 14 N.º1 (January 2025)
The construction sector survived the rout ushered in by the Great Recession, recording steady growth up until the pandemic. As of 2023, its contribution to GDP was around 5.0%, close to the EU-27 average of 5.2%. After the health crisis, the rebound in demand for housing coupled with price growth paved the way for a sharp recovery in sector profitability. However, monetary policy tightening then stalled the trend of expanding margins. The sector has since overcome this difficulty, but the shortage of qualified labour is becoming an increasingly pressing issue, undermining aggregate sector productivity particularly for smaller firms, as labour shortages persist despite a structural improvement in employment conditions. Although the Next Generation EU funds are enormously beneficial for the construction sector, it is vital to search for solutions for the shortage of human capital. Failure to do so could seriously jeopardise firms’ profitability and impede (urgently-needed) growth in the supply of housing.