Paper on the integration of the EU Single Market in construction services

  • Project lead:
  • Martin Falk

This study provides new empirical evidence on the degree of internationalisation of the European construction service sector. Indicators derived from data on FDI, activities of multinational firms and exports show a low degree of internationalisation. Evidence based on greenfield investments show a different picture, with the EU construction sector receiving more capital inflows than business services or software services. Further the main revenue of international construction firms comes from foreign markets (median 63 percent). These foreign revenues could include contract work for local companies but can also reflect the higher degree of internationalisation of larger construction firms. The number of received posted workers in the EU construction sector increased rapidly by 8 percent per year between 2010 and 2016 on average. However, there is no proof that the increase in the share of posted workers comes at the expense of domestic workers in the construction sector. Overall, posting workers is the main channel of the EU integration process in the construction sector rather than FDI activities. The explanation is that construction projects are temporary, labour-intensive and work on the site is required. Exceptions are large European international construction firms which show a foreign revenue share of more than 50 percent, probably due to the high proportion of construction work outsourced to local firms.