Layoffs after a slump in orders
Construction industry threatened with permanent loss of skilled workers
02/24/2023 1:17 p.m
The construction industry is registering fewer and fewer orders. The union IG BAU fears that skilled workers will be laid off – and later not come back. That would fuel the housing misery even further. One way or another, Germany will miss its goals.
In view of the slump in construction orders, the IG BAU trade union has warned of layoffs. If skilled workers were sent home, there would be a similar effect as in the catering trade, warned IG-BAU board member Carsten Burckhardt. He said: once you leave, you’re gone. He doesn’t come back when you need him again.”
The Federal Statistical Office in Wiesbaden had previously reported that orders for the German construction industry fell by 9.6 percent in real terms last year. At the current, sharply increased prices, however, the orders were worth 4.8 percent more than in 2021. The situation was similar with sales: According to the Federal Office, it rose nominally by 9.8 percent in 2022 to the new high of 108.9 billion Euro. Price-adjusted, the real decline was 5.8 percent compared to 2021.
The downward trend in orders had already started in the second quarter, partly due to high construction costs and rising financing costs. New business in residential construction fell particularly sharply with a real minus of 15.1 percent. In civil engineering, orders fell by only 3.0 percent. In residential construction, incoming orders are still in free fall, said Felix Pakleppa, General Manager of the Central Association of the German Construction Industry.
Even housing projects that have already been approved have hardly led to orders. The number of completed apartments is thus further and further away from the target of 400,000 new units per year. For 2022, the ZDB assumes 280,000 new apartments and in the current year only 245,000. For tenants, the situation in the big cities is becoming increasingly difficult and companies run the risk of not being able to keep their employees. For example, the announcement by the real estate group Vonovia at the end of January that it did not want to start any projects this year caused a stir.
The construction industry was the pillar of the German economy for a long time
The Construction Industry Association (HDB) expects stagnating employment figures and a further real drop in sales of six percent in the current year. According to General Manager Tim-Oliver Müller, the mood in the industry has darkened. 40 percent of the companies expected the business situation to deteriorate within twelve months. In building construction it is even 46 percent, which is no wonder in view of the “shock rigidity” in the housing construction market.
Associations and trade unions demanded simplifications in building regulations, which closely link subsidies to strict climate targets. IG-BAU board member Burckhardt referred to the continuing high demand for living space, energy-saving renovations and modern infrastructure. The federal and state governments should promote construction activity more intensively and make construction easier, especially for socially oriented housing companies.
The construction industry was a pillar of the German economy for a long time and has earned well thanks to the real estate boom. Residential construction in particular, which had boosted the industry in recent years, has stalled. The federal government’s housing targets are currently out of reach. But public clients and companies have also recently held back due to more expensive financing and skyrocketing construction prices. There is also uncertainty about the Ukraine war.