Over the 2010-2020 period, Germany’s GDP increased by 11.3%, reaching EUR 3.1 trillion in 2020. However, it declined by 4.6% in 2020 compared to the 2019 level. In 2021, Germany’s GDP and inflation are expected to grow by 2.8% and 3.2%, respectively, compared to the 2020 level , though in the final quarter of 2021 the economy even contracted by 0.7%, as persisting supply shortages of key raw materials and components were delaying the recovery.
In line with the economy, the number of enterprises in the broad construction sector increased by 33.2%, from 536,874 in 2010 to 715,198 in 2020. This growth was largely driven by the narrow construction (+71.7%) sub‑sector, followed by the architectural and engineering activities (+20.6%) sub‑sector, partially offsetting the decline in the real estate activities (-6.4%) and the manufacturing (‑4.9%) sub‑sectors over the 2010‑2020 period.
Similarly, the volume index of production in the broad construction sector increased by 16.6% between 2015 and 2020, primarily driven by a 26.9% and 15.1% increase in the volume index of production in the construction of civil engineering and construction of buildings, respectively, over the same period.
Likewise, the totalturnover of the broad construction sector reached EUR 618.6 billion in 2019, registering a 64.0% growth above the 2010 level (EUR 377.3 billion). It further increased to EUR 638.9 billion in 2020, representing an overall growth of 69.3% since 2010. With regard to sub‑sectors, all registered growth – the narrow construction (+112.0%), the architectural and engineering activities (+71.6%), the real estate activities (+29.0%) as well as the manufacturing (+15.4%) over the 2010‑2020 period.
At the same time, the gross operating rate of the broad construction sector, an indicator of the sector’s profitability, stood at 20.1% in 2019, 2.4 percentage points below the 2010 level (22.6%).
With regard to employment, in 2020, there were 4,511,733 personsemployed in the broad construction sector in Germany. This represented a 53.6% rise in the number of persons employed from the 2010 level (2,938,001 persons). This was largely driven by increase in the number of persons employed in the narrow construction (+75.4%) sub‑sector, followed by the architectural and engineering activities (+40.8%) over the 2010‑2020 period. The real estate activities and the manufacturing sub‑sectors also experienced an increase of 32.9% and 2.1%, respectively, over the same period.
The German government has initiated several measures aimed at the development of the country’s housing market. It has also allocated EUR 8.0 billion in housing subsidies, to be used over the 2018-2024 period. In 2020, a new tax incentive law for privately financed new rental apartments was also introduced along with other relevant measures such as the extension of the rental price brake by five years and increased incentives for switching to climate friendly heating systems.
Under its 2021-2026 National Recovery and Resilience Plan (NRRP), Germany has allocated EUR 2.5 billion for investment in energy efficient buildings renovation. Through this broad renovation programme, Germany expects to deliver at least 30.0% energy savings.
As outlined in its 2021‑2026 NRRP, Germany’s residential programme intends to achieve deep renovation of 40,000 dwellings by 2026. This measure will be complemented by municipal living laboratories for the energy transition exploring innovative solutions for an efficient and sustainable energy supply in urban neighbourhoods through pilot projects. Additionally, under the buildings renovation initiative, the government has unveiled grants for financing the renovation of gas-fired boilers. The NRRP also discusses other incentives such as introduction of carbon pricing, using revenue from such pricing to promote climate protection measures, various tax concessions as well as a ‘carbon dividend’ to be paid to low-income households. Moreover, the NRRP measures are expected to be extended beyond 2026 with national funding.
With regards to civil engineering, the German government has already announced a EUR 86.0 billion investment plan in the national rail infrastructure, as part of the total funding of EUR 269.6 billion under the 2030 Federal Transport Infrastructure Plan. In January 2020, the German government finalised a 10-year EUR 86.0 billion LuFV III railway operating and financing agreement to modernise its rail infrastructure. The project includes the renewal of around 2,000 km of track and 2,000 turnouts each year as well as the modernisation of 2,000 bridges. Similarly, the German Federal Ministry of Transport signed an agreement for the construction of the Dresden‑Prague cross-border rail link. The project is expected to cost EUR 5.4 billion and involves the construction of a railway line from Dresden, Saxony in Germany, to Prague in Czech Republic, as well as a 25 km tunnel under the Erzgebirge Mountains. Additionally, from 2021, the German government plans to raise EUR 1.0 billion of federal funding per year to expand local public transport infrastructure. This is expected to increase to EUR 2.0 billion per year by 2025.
Presently, the German construction sector continues to face challenges on one major issue. Labour shortage is considered to be a major roadblock, in comparison with other business sectors. In order to tackle this, the German government implemented the ‘Skilled Workers Strategy’ (Fachkräftestrategie), which fosters skilled labour immigration from developing countries. The Skilled Labour Immigration Act, effective from 1st March 2020, also facilitates in non-EU immigration. In addition, the issue of late payments continues to hinder the development of the German construction sector. For instance, as per the Survey on the Access to Finance of Enterprises (SAFE) 2021 report, about 25.4% of enterprise respondents reported their payments to suppliers being affected due to late payments by customers. This was followed by 19.2% of respondents who stated that late payment affected production or operational activities.
Overall, the German broad construction sector has a positive outlook. Investment in public sector infrastructure, digitalisation, energy efficient housing renovations as well as a green circular economy, backed by EU funding, is expected to lead the future growth of the sector.