In today’s construction news, learn about CEO Anders Danielsson informed investors on a call that the business has lowered its forecast for U.S. construction, which accounts for a significant portion of its sales, from strong to steady. On the other hand, both European and American construction productivity has dropped since the start of the 2000s.
Skanska Lowers the Estimate for US Construction
Original Source: Skanska downgrades US construction outlook
In its first quarter results call on May 7, Sweden-based developer and builder Skanska admitted economic risks may affect its forecast but remained optimistic.
CEO Anders Danielsson told investors that U.S. construction, a significant revenue generator, has been downgraded from strong to steady.
“We still see a pipeline, but our customers take longer to invest and start a project. However, U.S. commercial building is stable, Danielsson added. However, Danielsson dubbed the US civil sector “encouraging,” partly owing to government infrastructure investments. The 12-month forecast for U.S. civil work is good.
“We see a very healthy [civil] pipeline, no decrease in activities,” he added.
However, economic uncertainty has affected the forecast, Danielsson said, adding that “it’s not a specific segment or specific clients, it’s more that they feel some uncertainties in the market.” He also admitted that tariffs have contributed to U.S. concern, but said the worldwide firm’s local operations in all countries minimise such impacts.
Skanska claimed that President Donald Trump’s tariffs, which varied, raised uncertainties for owners considering projects.
On previous earnings calls this month, construction CEOs Jim Breuer, Fluor’s leader, and Troy Rudd, AECOM’s lead, expressed confidence about tariff uncertainty, citing only isolated project delays. However, both businesses reported solid backlogs and no slowdown.
Skanska announced a 118% rise in operational income from the same period last year for the three-month period ending in March 2025, with operating income reaching 1.1 billion Swedish crowns ($110.4 million).
Construction earned over 1.2 billion crowns in Q1, boosting income. The corporation has a record 263.6 billion crowns in order backlog across all continents, including 23 months of U.S. construction.
Skanska CFO Jonas Rickberg, who became finance head in January, called construction performance “overall very strong.”
The EU Construction Sector Outperforms the US
Original Source: Why the EU construction sector is steadily outperforming the US
Since 2000, European and American construction output has declined. EU contractors have outperformed US contractors, surprisingly. There are several reasons for this and ways to close the gap.
The Draghi study warns that the EU risks slipping behind its global competition without targeted productivity and competitiveness reforms. This applies more to global businesses like manufacturing than local building. Manufacturing productivity in the EU falls behind the US, whereas construction productivity is higher. However, building workforce productivity has fallen in both regions. Still, productivity-boosting strategies may help alleviate workforce shortages. We predicted that 2.5 million fewer EU construction workers would be needed with a 20% better productivity rate.
Construction worker productivity decline
Construction workforce productivity is well behind manufacturing. Over the previous 25 years, US industrial workers can now create twice as much in the same hours. This has increased roughly 60% in the EU. Growing efficiency helps manufacturers create more per hour, making things cheaper. For instance, electronics costs fell for a long time.
In contrast, US and EU construction workforce productivity fell 25% and 15%, respectively. Thus, more construction workers are needed for the same production.
EU construction labour productivity lags behind manufacturing but surpasses US labour productivity due to added value in volume (index 2000=100).
We hope to answer various questions in this essay.
Why does construction labour productivity drop matter?
Why is construction workforce productivity low?
Why do US contractors perform worse than EU ones?
What can be done?
Why is labour productivity falling problematic?
Higher costs and labour shortages
The US and EU building sectors are less efficient. Because manufacturing enterprises have improved efficiency more than building contractors, inflationary pressure has been lower. Efficiency advances also reduced output price increases.
Over the past 25 years, output costs in both regions have climbed by 35%, while American construction prices have quadrupled. The price rise for EU contractor clients was less, but still roughly 250%. Contracting is mostly local and doesn’t effect global competitiveness. However, it raises the cost of new premises for businesses and consumers. Thus, it delays company investments and hinders new housing project development in metropolitan areas with severe shortages.
US building prices soar
Index 2000=100 output price changes
Low labour productivity growth raises prices and depletes construction workers. Due to staff shortages, almost 30% of EU building contractors might not finish their job by March 2024. This may undermine the massive challenge of making real estate more sustainable.
The EU employs almost 14 million construction workers. As noted, a 20% efficiency increase might lower EU construction worker demand by more than 2.5 million. US productivity increases may be even more crucial due to immigration constraints and the sector’s substantial foreign labour use. The EU must also address the elderly workforce.
Why does construction labour productivity lag?
Construction productivity is lagging worldwide, not only in the EU and US. Construction labour productivity grows slowly in China and Japan.
We may go to the sector’s conventional, anti-innovation ethos to explain this. However, not all construction corporations reject innovation and productivity. Here, construction’s market structure is more essential than manufacturing’s. A few major elements determine this.
Construction businesses work at multiple sites for each contract. Because production is related to the place (i.e., the construction site), industrialising the construction process is harder than in a factory. Heavy machinery is hard to move, circumstances vary, and rules vary by nation. By undertaking a lot of physical work, building businesses maintain flexibility. Since few construction enterprises operate abroad, foreign construction technologies are less likely to be adopted.
Building on someone else’s idea: The practice of architects designing buildings and outsourcing specifications and drawings is declining. Construction enterprises must build something fresh each time and follow laws that vary by municipality. Imagine every vehicle customer getting their ideal automobile manufactured from their own drawings. Industrialisation is unlikely under given conditions. This encourages “beginner’s mistakes” (failure costs), discourages industrialisation of the building process, and discourages machinery investment (which can frequently execute just one task).
A volatile building market: building enterprises must be adaptable due to fluctuating new building demand. Production resource investments raise fixed costs. In emergencies, this may be disastrous. Construction is so localised that a rebound in one sector may offset a catastrophe in another, making it difficult to disperse risks abroad. Finally, construction businesses cannot generate stock and allow stock to rise or fall to offset demand shocks.
Later in this essay, we discuss how the construction business might enhance efficiency through innovation.
Why are US contractors doing worse than EU contractors?
As said, US construction productivity has fallen more than in the EU. This has numerous causes:
Sharper production drop
One reason US construction productivity was higher than EU was a sharper fall in output quantities. Construction production in 2024 was 8.4% lower than in 2000, despite the US building sector recovering from the financial crisis. EU sector levels are 4.8% lower than in 2000, although the effect has been less severe.
A decline in corporate turnover seldom boosts productivity. Overcapacity from contraction might lead to less productive work. These two factors also reduce company investment in new, more efficient gear. This is usually unfunded and unnecessary due to overcapacity. Contraction reduces economies of scale. Thus, US worker productivity is lower than EU productivity due to lower output levels.
Significant US construction production decline
Added value of building production volume 2024 vs. 2000
Lower US construction investments
Machinery boosts construction worker productivity, but US construction businesses spend less in it. EU contractors have invested nearly twice (11%), whereas US contractors have invested 6% since the turn of the century. Although US investments were smaller before the financial crisis, a steeper decrease in US production may explain this.
EU contractors invest more than US counterparts in capex as a percentage of value added.
Less robotic construction equipment in the US
US construction uses less robotic technology than European building due to lower capital goods investments. The EU has 1.5 robots per 10,000 construction workers, whereas the US has 0.60. This is low compared to manufacturing, where there are around 200 robots per 10,000 workers in both nations. It’s so low that it probably doesn’t affect productivity. It shows again how US contractors lag behind EU contractors in innovation and investment.
It’s remarkable that EU contractors have more robots than China and Japan, even though China’s construction sector is increasingly adding robots.
EU contractors have numerous robots
Number of robots per 10,000 workers, 2023
Digitalisation slows in US
Next to industrialisation, digitalising building processes boosts efficiency. Information offered during construction can also be greatly improved. Automatically updating coworkers, subcontractors, and suppliers on the latest changes ensures that everyone is aware. This also simplifies error prevention. Finally, there will be one digital single source of truth (SSOT) that updates everyone on digital (3D) design changes and building process phases. Real-time construction updates are shared with all stakeholders.
European contractors also spend more in digitisation than US contractors. In various European nations, software per employee approximately quadrupled from 2000-2022 (from €546 to €1,065). The US only saw a 44% rise (from $582 to $840). EU contractors may have gained productivity from these digitisation initiatives.
More digital construction in Europe
Development software per construction worker, 2000–2022.
Subsector composition influence
Some building tasks are tougher to industrialise. Customisation is common in rehabilitation and maintenance, and this is typically done in speciality construction. Because of their customisation, infrastructure projects are harder to industrialise. Digitalising can assist here, as with speciality construction.
These two subsectors have grown faster in the EU than the US since the 21st century. This may have lowered EU productivity growth more than in the US, but construction productivity may have been even higher.
Increased EU civil engineering and specialist construction market share
Specialised construction and civil engineering share of construction production
Can it be done?
Digitalisation, industrialisation, and wooden building boost productivity.
Despite the challenges we’ve discussed, construction businesses may boost productivity. Industrialisation, mostly with machines and/or robotic gear, might standardise work. Timber is more sustainable than other materials and lighter, making it a desirable industrial commodity to deal with. This makes huge, prefabricated lumber parts easier to carry, process, and attach. Heavy machinery is less needed due to lesser weight.
Digital technologies may expedite building projects and boost production. Digitalisation can increase information sharing between departments and chain partners. Avoiding mistakes is also easier. Digitalisation may automate information flows between colleagues and subcontractors so they are always notified of the newest changes (via SSOT).
Every company needs more efficient construction.
Efficiency gains help companies cope with staff shortages, keep costs down, and stay competitive. Further digitalisation is needed. Initial investments and risks are minor digitalisation barriers. Industrialisation is important, however the first expensive investments (plant, machinery, and robotics) should be addressed carefully. Construction enterprises who fail to achieve efficiency will find themselves in a smaller pond, making the transition to a more sustainable and carbon-neutral business model harder.
Summary of today’s construction news
In summary, at 263.6 billion crowns across all continents, the company’s order backlog is still historically large. In the United States alone, over 23 months of construction work are scheduled. Construction performance was hailed as “overall very strong” by Skanska CFO Jonas Rickberg, who assumed the role of Skanska’s finance head in January.
On the other hand, EU contractors have outperformed their American competitors. Failure to achieve strong efficiency levels would make it harder for construction companies to transition to a more sustainable and carbon-neutral business model and leave them fishing in a smaller and smaller pond.
