The construction sector has warned that costs will rise in the EU’s recovery plan

Directors of the construction industry across Europe have warned that “dangerous” price increases and the shortage of many construction materials could weaken the EU’s € 800 billion economic incentive program.

The EU construction sector generates almost 10% of the bloc’s economic output and extensive infrastructure projects make up a large part of the Brussels recovery fund, which will distribute grants and loans rebuilding the economies of the member states After the Covid-19 pandemic.

But prices for construction materials ranging from steel to wood, concrete and copper have begun to rise sharply in recent weeks, including in Europe and elsewhere, including the US and China, as the economic rebound has led to a rise in construction.

Many producers are unable to supply the material before the end of the year and this is a real problem

According to the European Federation of the Construction Industry (FIEC), the prices of bitumen have risen by 15% in just three months, that of cement has risen by 10% in a single month and that of wood by more than 20%.

Public infrastructure projects typically impose penalties on builders for delays, with contractors often having to bear the cost of unexpected price increases.

Domenico Campogrande, CEO of FIEC, warned that price increases and additional delays could reduce the impact of EU funds.

“It’s a risk to have this big EU recovery plan, but if 30% to 40% of those funds go into financial instruments to cover higher prices, it would be real nonsense because it won’t go into the real economy,” he said.

In recently a letter The European Commission has been “alarmed” by the FIEC over price increases and a shortage of materials, including more than doubling the Italian price of steel bars used to make reinforced concrete in the four months to March.

“This phenomenon is jeopardizing the contribution of the construction sector to the economic recovery and is threatening the potential impact of European recovery programs,” he said.

In Italy – the largest beneficiary of the stimulus from Brussels – the government expects to spend more than € 100 billion on EU funding to build new infrastructure over the next five years. But the construction sector has warned officials that it will face the challenge without much reform.

“We have a shortage of many basic building materials and this is very dangerous because Italy is being hit harder than the rest of Europe,” said Flavio Monosilio, research director of the Italian construction companies association ANCE. “This crisis is at the heart of the EU’s new recovery plan.”

Construction managers have blamed a number of factors on the neck of the button, including a significant rebound in demand supply of materials in many countries, as well as the disruption and ongoing trade tensions associated with the supply chain pandemic.

Some materials have had additional problems, such as skin infestation that has affected wood production and delays in the distribution of undelivered steel.

Thomas Birtel, general manager of Austria’s Strabag construction team, said there had been a “huge increase in the last two weeks” and that the company “should report delays in individual works because the material is no longer available”.

Strabag, which built the Danish Copenhagen Metro and the Limerick Tunnel in Ireland, has concrete and asphalt plants, but Birtel said: “The construction company is small and it is not possible to control the supply chains of all the buildings. Materials.”

In Germany, 44% of construction companies surveyed by the Ifo Institute in May reported problems with timely access to materials, down from 6 percent in March.

“We haven’t seen a bottle like this since 1991,” Felix Leiss told Ifo. “This, of course, slowed construction activity in April, at least temporarily.”

Production in the German construction industry fell by 4.3% in April compared to the previous month, although companies in the sector registered an order book of 62 billion euros in March.

“A lot of producers can’t supply the material before the end of the year and that’s a real problem,” Stephan Rab said at the German construction industry association. “A lot of money is being spent on public and private sector construction projects in the US and China and this is absorbing a lot of material. Wood is being produced in Germany and exported to the US, so there is little here. ”

Some German politicians have called on Berlin to seek temporary EU export restrictions on wood and other materials.

While the U.S. government is preparing to launch $ 1.7 billion program infrastructure and a global economic rebound is expected gain pace, pressures are expected to remain high in the coming months.

“It will take time to get back to normal, at least by the end of the year,” Campogrand said.

Some countries, such as France and Germany, have responded by easing the rules of some public sector construction contracts, canceling delay rates and compensating contractors for unexpected price increases.

According to Monosilio, Rome had to offer some relief to the sector, as it suffered a decade-long decline in public infrastructure investment, lack of bank financing and significant delays in project approvals and payments.

Italian Prime Minister Mario Draghi has said it depends on the success of a “country’s destiny” 248 million euro package mostly investments and reforms funded by the EU Recovery and Resilience Plan. It includes investments in high-speed rail lines, renewable energy facilities, smart grids and energy-efficient buildings.

EU states have a poor track record in allocating funds; In the six years to 2020, on average, they spent just over half of the money allocated by Brussels.

Without reform to address the problems in the Italian construction sector, Monosilio said similar problems could strain EU recovery costs.

“The Draghi government wants to improve the situation completely,” he said. “[But] It is the sword of Damocles that hangs over the whole of Europe. “