Why is the EU construction sector steadily outperforming the US?

Digitalisation, industrialisation and more efficient construction are all likely to play a crucial role in keeping the construction sector afloat across both the EU and the US (Photo: AdobeStock)

According to recent analysis by ING Research, based on data from Eurostat and Oxford Economics, construction productivity in the EU has declined by 15% since 2000, compared to a sharper 25% drop in the US. Over the same period, manufacturing productivity has gone up, doubling in the US and rising nearly 60% in the EU.

Despite this decline, ING’s analysis notes that EU construction companies have consistently invested around 11% of value added in capital expenditure, compared to just 6% in the US.

By March 2024, over 30% of EU building firms reported being unable to meet demand due to personnel gaps. ING previously estimated that a 20% increase in productivity could reduce the need for more than 2.5 million additional construction workers across the industry, helping to ease pressure on an ageing workforce and accelerate the delivery of much-needed housing and infrastructure.

ING also highlights that output prices across both regions have risen by roughly 35% over the last 25 years, but US construction prices have more than tripled over the same period. Clients of EU contractors were faced with smaller price increases, but still saw an uptick of almost 250%.

The research points to several structural barriers impeding productivity growth, including the sector’s fragmented, project-based nature and the difficulty of standardising work across diverse sites and regulations. Nonetheless, ING identifies promising opportunities to improve efficiency through digitalisation, off-site construction, and greater use of prefabricated timber elements.

Without strategic investment and innovation, ING warns that the construction sector will struggle to meet future demand, while falling further behind more productive global industries.