How construction can help refloat the EU's economy

May 2009 - Ever since the impact of the economic crisis began to be felt in Europe at the end of 2008, CEMBUREAU has been vocal in calling upon the European Institutions to stimulate investments in the construction sector as a tool to refloat Europe’s economy. In February 2009, that message was pressed upon President Barroso as, it was stressed, this would not only assist the EU’s economy in the short term, but also improve the EU’s infrastructure and competitiveness in the longer term. Emphasis was also placed on “smart investment”, especially in providing Europe with more energy efficient buildings. 

CEMBUREAU, fortunately, was not alone to carry these messages. The European construction sector, as a whole, joined forces. The European Construction Forum (ECF) and its Members, including CEMBUREAU, were very active.

Various measures have been adopted, as a result, by the EU.

1. European Regional Development Fund

   First of all, on 17 April 2009, the European Parliament and the Council amended Regulation (EC) No 1080/2006 of 5 July 2006 on the European Regional Development Fund (ERDF).

   Consequently, in each Member State, spending on energy efficiency improvements and on the use of renewable energy in housing is eligible for ERDF support up to a ceiling of 4% of the relevant Member States’ total national ERDF allocation.

   For Member States which have acceded to the EU on or after 1 May 2004 (the so-called “new Member States”), this potential 4% allocation comes on top of the 3% already foreseen under the 2006 Regulation.

   Various conditions are imposed. Most relevant is that eligibility for ERDF support for housing must be related to projects developed within the context of “social cohesion” policy. This loose term is interpreted as allowing private, as well as public, projects to qualify.

2. Reduced VAT in the construction sector

   Responding to the request of the December 2008 European Council, the Council (ECOFIN) amended, on 10 March 2009, Directive 2006/112/EC on VAT.

   The new text allows Member States to apply reduced VAT rates to the “Renovation and repairing of private dwellings, excluding materials which account for a significant part of the value of the service supplied.”¹

3. PPPs for Energy Efficient Buildings

   The European Commission (Commissioner for Science and Research Janez Potocnik) concluded the long overdue agreement, on 1 April 2009, with high representatives of the automotive, construction and manufacturing sectors for developing smart investments in clean technologies through PPPs (Public-Private Partnerships).

   The first step for these partnerships will be the publication of joint cross-thematic calls for research projects by the end of July, funded by the 7th Framework Programme for Research and Development of the European Commission.

   Within this framework a financial envelope of €1bn is earmarked for Energy Efficient Buildings.

   The Programme will be financed jointly by industry and the European Commission under FP7. The programme will focus on renovation of existing buildings and special attention will be given to SMEs.

4. The European Economic Recovery Plan

   In order to boost European infrastructure and improve the energy efficiency of buildings, the European Commission is launching a €500m call for proposals for trans-European transport (TEN-T) projects with the aim of starting the construction of infrastructure projects before the end of 2009.

   In addition, the EIB (European Investment Bank) is increasing its financing of climate change, energy security and infrastructure investments by up to €6bn per year and the EBRD (European Bank for Reconstruction and Development) will double its financial resources dedicated to the same sectors with special emphasis on municipalities (€5bn).

   All of the above measures will help the European economy as well as foster growth in the construction sector itself which, as a whole, represents 10.7% of the EU’s GDP².

   Emphasis on energy efficient buildings is clearly becoming a key priority. On 23-24 May, G8 (Canada, France, Germany, Italy, Japan, Russia, the United Kingdom and the United States) Energy Ministers called for the creation of a global low-carbon energy technology platform (ITEEC for international partnership to promote energy efficiency) to develop the project worldwide. One of the initial tasks identified by the Energy Ministers includes, unsurprisingly, the launch of a Sustainable Buildings Network to promote energy efficiency in residential, commercial and industrial buildings.

   The stage is thus set and it is up to the concrete and cement industries to compete for a share of the incentive made available by playing an active part in projects to come.

¹See Eurobrief - March 2009
²Source: European Construction Industry Federation (FIEC)