Labour shortages in southern Europe threaten post-Covid building boom

Construction is booming in Italy but industry executive Angelica Donati is concerned about the sector’s prospects just as it is about to get even busier with the rollout of EU coronavirus recovery funds for infrastructure investment.

“It’s really hard to find labour and prices have gone crazy,” said the head of business development at construction company Donati. “There is so much competition. Companies are filching employees from each other.” 

As building activity surges across southern Europe after a pandemic slowdown, Italy is not the only country being held back by a workforce that shrank during the eurozone’s economic downturn of the previous decade. In Greece, Spain and Portugal, the shortages and wage price spirals could lead to delays in big projects or even cancellations, industry experts said.

They added that the labour market pressures threaten to jeopardise the effectiveness of the EU’s landmark €750bn Covid recovery fund, which has a major focus on infrastructure investment.

“The infrastructure projects funded by the EU’s recovery facility, which have a specific deadline for their completion, will face great challenges,” said Giorgos Stasinos, president of the Technical Chamber of Greece, the government’s engineering advisory body.

The higher wages commanded by workers, many in specialist roles such as welding, will be a burden on many projects, said the civil engineer. “With the increased salary costs, budgets will also need to be increased in order to complete the projects on time,” Stasinos added.

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In Italy, which is the largest recipient of funds from Brussels’s Covid recovery plan, the national builders’ association ANCE estimated at the end of 2021 that its members needed another 265,000 construction workers just to complete current projects.

Italy’s building workforce increased 5.9 per cent in 2021 to reach 1.65mn people, up from 1.56mn the previous year, according to national statistical agency Istat. The growth was robust but not enough to meet rising demand, enabling workers to secure far higher wages. Overall, income for the industry’s workforce grew 21 per cent last year.

The frenetic activity is in marked contrast with activity during Italy’s protracted economic doldrums, the sector’s revenues shrinking by about 33 per cent from 2008 to 2020.

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A decade-long sovereign debt crisis drove an even bigger downturn in Greece. Construction’s share of the economy’s gross value added collapsed to 1.6 per cent in 2017 from 7.5 per cent in 2006. According to Greece’s Alpha Bank, the industry’s workforce shrank by 57 per cent from 2009 to 2020.

“We went through a decade of crisis where there was a haemorrhage of not only engineers but also basic construction workers who looked for a job abroad,” said Christos Panagiotopoulos, chair of Aktor, one of Greece’s largest construction companies.

Most people who left Greece during the crisis have not yet returned, he added. “People need some sense of security that they will have a job for the next decade in order to return to Greece and they don’t feel that yet,” he said.

Panagiotopoulos says wages have increased by 20-30 per cent since the start of 2021 as demand for workers outstrips supply.

The commercial and residential redevelopment of an old airport near Athens, Europe’s largest regeneration project, will add even more pressure in the search for workers. “Hellinikon is a huge project on its own,” said Panagiotopoulos, adding that in less than a year the shortages will be critical for some contractors.

From new rail lines and roads to green ports and special economic zones, the wave of EU-funded infrastructure projects will intensify the demand for workers.

Companies in Spain and Portugal warn that labour shortages could jeopardise EU-funded construction and renovation projects worth billions of euros. In Spain, more than two-thirds of the €140bn the country is due to receive in grants and loans from Europe’s coronavirus recovery funds is expected to be channelled into construction-related projects.

But in a sector where unions and employers say up to half a million more workers are needed in Spain and 80,000 in Portugal, attracting and training the numbers needed to meet the 2026 deadline for using EU recovery funds is proving highly challenging. Crane operators, carpenters, welders and site managers, who require accredited training, are the hardest workers to find, according to Spanish firms.

Manuel Reis Campos, head of Portugal’s AICCOPN construction association, said the government needed to move ahead with measures to improve “transnational mobility” within the EU and address other labour market issues.

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Construction companies throughout southern Europe are rushing to get workers on their payroll.

When Spain’s decade-long housing bubble burst in 2008, the construction industry shed 1.8mn jobs. Companies are paying higher wages and offering free training in projects sponsored by the government, employers and unions. But employers say many workers still see construction as offering an insecure future.

In Italy, ANCE in June signed an agreement with a charity to identify and train prospective migrants willing to come to work in construction in Italy. Stasinos proposes a similar solution to Greece’s staff shortage, deploying Syrian and Afghan asylum applicants. “We need to create an educational programme to train refugees in the construction business and fund their work,” he said.

While Donati said the lure of higher wages will help ensure that “every last person who worked in construction will be recruited into the workforce”, she forecast that the labour shortage would remain a major issue until more younger workers consider construction an attractive career prospect.

“We have a saying, ‘when the blanket is too short, you can pull it one way, or pull it the other way, but it still won’t cover the whole surface,’” said Donati, who is also president of ANCE’s youth wing. “This is a long-term concern.” 

Additional reporting by Peter Wise in Lisbon