Efficiency

The assessment of the efficiency criterion is based on the quantification of costs and benefits generated by the selected EU acts on the construction sector; this analysis is summarised under EQ7. Based on this quantification, the following aspects are also assessed: (i) to what extent costs are as low as possible, under EQ8; (ii) what is the impact of the identified legislative shortcomings on the performance of the sector, under EQ9; (iii) what are national factors having an impact of costs and benefits, and the magnitude of these impacts, under EQ10 and 11; and, finally, (iv) whether market-based cooperation could be identified with respect to the themes touched by the Study, under EQ12.

EQ7. What are the costs and benefits associated with the implementation and transposition of selected EU acts for the construction sector, in particular for its SME? Here below, the quantitative assessment of costs and benefits attributed to the various EU acts for the construction sector is presented. First, the analysis delves into administrative and compliance costs and cost savings; then, new market opportunities are quantified. For each category, costs, benefits and market opportunities are presented per category of operator. Costs and benefits, including new market opportunities, are compared with sectoral added value and, where relevant, turnover (source: Eurostat). Comparison with total market size is also used when discussing the regulation-induced markets, e.g. for energy efficiency-related construction activities (source: CRESME). The comparison is not provided when the costs and benefits estimated are too low compared to the sectoral added value (or turnover, or market size). The coverage of MS is extended to EU28 when the analysis is based on own primary sources and Eurostat Data, i.e. for the CPR and the PQD. When more specific data sources are used (i.e. CRESME for the construction market, various EU and national sources for late payment statistics, and national sources for energy efficiency related markets) the coverage is limited to the 10 MS to be analysed in-depth by the Study. The diachronic coverage spans from 2004 to 2014 where possible, depending on data availability and the date of coming into force of the provisions. Administrative and compliance cost and cost savings

Construction Product Manufacturers. The administrative burdens and substantive costs due

to the applicable regulatory framework, i.e. the CPD and, from 2013 onwards, the CPR, were calculated across the 2004-2014 period. Furthermore, part of the burden savings generated by the CPR were also estimated, as well as one-off costs linked to the shift to the new legislation. In 2014, total CPR costs account for about 1.1% of the turnover, and about 3.8% of the sectoral value added. The increase in 2013, linked to the introduction of the CPR, is due to:

1. one-off costs due to the adaptation to and familiarisation with the new regulation. These costs, were estimated at €522 mln in total, and annualised over 2013 and 2014 will not apply as from the following years;

2. costs linked to the provision of the DOP to customers, taking savings linked to the eDOP into account.

No quantitative information is available on the cost savings effect of other simplifications, due to the limited take-up of these provisions. Regulatory burdens are summarised in Exhibit 5.2 below.

Supporting study for the Fitness Check on the construction sector: EU internal market and energy efficiency legislation – Main Text

126

Exhibit 5.2 EU Regulatory burdens and Burden Savings Generated on Product

Manufacturers by the CPR/CPD in the EU (€ mln)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Total Costs for the Sector 1,100 1,200 1,300 1,600 1,600 1,600 1,600 1,700 1,600 3,400 3,400 Share over Value Added 1.3% 1.4% 1.3% 1.5% 1.5% 1.6% 1.7% 1.8% 1.8% 3.8% 3.8%* Share over Turnover 0.4% 0.4% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 1.1% 1.1%

Sectoral Statistics refer to the Construction Product Industry, as defined in Annex II *: Estimate based on 2013 Value Added. Source: Authors’ own elaboration

Professionals and Craftsmen. As discussed in Section 5.4 above, the administrative burdens

generated by the PQD mechanisms are not considered significant by stakeholders, and are low both in absolute terms and compared to the mobility added value. In the most recent part of the period, administrative burdens ranged from €1.3 to € 2.3 mln, mainly depending on the size of cross-border flows of professionals and craftsmen (i.e. the number of applications for establishment or temporary provision of services). The simplifications linked to the revision of the PQD were also quantified for the period 2008-2014, i.e. starting from its date of implementation. Savings were generated by the rationalisation and consolidation of the pre-existing acts on the mobility of professionals and craftsmen, and by introducing the temporary mobility regime.351

Exhibit 5.3 EU Regulatory Costs and Cost Savings Linked to PQD in the EU (€ mln)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Total

Burdens 0.3 0.9 0.9 2.4 2.0 1.8 1.6 2.1 2.3 2.3 1.3

Total

Savings - - - - 0.8 0.7 0.7 0.9 1.0 1.0 0.5

Source: Authors’ own elaboration

Construction Companies. Two effects on construction companies were quantified: (i)

substantive (financial) cost savings linked to the introduction of the LPD; and (ii) administrative burdens linked to the EPC.

With respect to the LPD, financial cost savings could be quantified for 2014, i.e. the only full year in scope of the Assignment following the implementation date. In total, cost savings amounted to about €160 mln, of which €119 mln were attributed to the EU framework, accounting for about 0.02% and 0.01% of the total turnover and about 0.05% and 0.04% of the value added in the MS for which data on savings are available, respectively.352 _{Exhibit 5.4 provides an estimate of}

the financial cost savings generated by the reduction in the payment duration in the construction sector in selected MS. Negative values refer to additional costs in countries where the payment time increased.

Exhibit 5.4 Financial Cost Savings Generated by the LPD in 2014 for the Construction

Sector in 6 MS (€ mln)

Total cost savings EU cost savings

Financial Cost Savings 160 118.7

Share of Sector Turnover 0.02% 0.01%

Share of Sector Value Added 0.05%* 0.04%*

Sectoral statistics refer to construction of buildings and specialised construction activities (NACE Sections 41 and 43). *: Estimate based on 2013 Value Added. Source: Authors’ own elaboration

351 _{The comparison with turnover and value added is not meaningful here, given that burdens are almost}

insignificant when compared to sectoral statistics.

Supporting study for the Fitness Check on the construction sector: EU internal market and energy efficiency legislation – Main Text

127 With respect to the administrative burdens generated by the EPC, only a small share of the costs incurred due to this certification fall upon construction companies, with the bulk falling on owners, project developers and real estate operators. Data are available for the 2010-2014 period and are shown in Exhibit 5.5 below. The total burdens of EU origin for construction companies amount to €23-30 mln per year, which is a negligible amount compared to a value of production amounting to about €875,000 mln in 2014 in the same MS (source: CRESME).

Exhibit 5.5 EU Regulatory Costs for Construction Companies due to EPC in 10 MS 2010-

2014 (€ mln)

2010 2011 2012 2013 2014

Administrative

burdens 29.9 26.0 26.5 24.8 €3.0

Source: Authors’ own elaboration

New market opportunities

Professionals and Craftsmen. Two market opportunities for professionals were quantified: (i)

the mobility added value generated by the PQD; and (ii) the new revenues generated by the issuance of the EPC.

The added value generated by professionals and craftsmen moving abroad, both for establishment and temporary mobility, was estimated for the period 2004-2014. The impact of the mobility of professionals and craftsmen remains low compared to the size of the sector, amounting in 2014 to 0.04% of the value added for engineering services, 0.41% for the four crafts considered, and 0.29% for architects. Results are shown in Exhibit 5.6.

Exhibit 5.6 Mobility Value Added Generated by the PQD in the EU (€mln)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Architects Mobility Added Value (€mln) 0.08 4.15 8.16 21.95 39.83 43.49 50.20 53.23 60.57 64.57 60.35 % over Sector Added Value 0.00% 0.02% 0.04% 0.10% 0.15% 0.19% 0.22% 0.24% 0.27% 0.29% 0.29% Engineers Mobility Added Value (€mln) 2.59 6.82 10.86 14.70 17.62 21.76 27.08 31.87 37.79 46.41 41.59 % over Sector Added Value 0.00% 0.01% 0.01% 0.01% 0.02% 0.02% 0.03% 0.03% 0.03% 0.04% 0.04% Masons, bricklayers, electricians, painters, and decorators Mobility Added Value (€mln) 5.47 21.12 37.82 104.55 166.21 182.01 219.45 279.78 338.08 393.81 472.02 % over Sector Added Value 0.01% 0.02% 0.03% 0.08% 0.12% 0.15% 0.18% 0.23% 0.28% 0.34% 0.41% Sectoral statistics refer to NACE Classes for professionals and craftsmen as defined in Annex II.

Source: Authors’ own elaboration

The revenues generated by the issuance of the EPC amounted to €611 mln in 2014 (the only year in which data for nine out of the 10 MS covered by the Assignment are available).353 _The

revenues have already been discounted for intra-value chain costs, i.e. by the share of EPC costs borne by construction companies. In 2014, this market accounted for about 0.5% of the value added generated by professionals in these 9 MS.

353 _{The steady amount of market revenues is largely due to the increase of data coverage from additional}

Supporting study for the Fitness Check on the construction sector: EU internal market and energy efficiency legislation – Main Text

128

Exhibit 5.7 EPC: New market Opportunities of EU Origin for Professionals (€ mln)

2006 2007 2008 2009 2010 2011 2012 2013 2014

Market

Revenues 0.9 4.2 122.9 212.5 166.8 170.5 170.6 325.5 611.0 % over Sector

Value Added - - 0.11% 0.22% 0.16% 0.17% 0.16% 0.29% 0.54%* Sectoral statistics refer to engineering and architectural activities (NACE Sections 71.11 and 71.12)

*: Estimate based on 2013 Value Added. Source: Authors’ own elaboration

Construction companies. The total energy efficiency-related turnover for construction

companies in both new and existing building segments was estimated for the sub-period 2010- 2014, that is the years for which comprehensive data are available. The value of this business opportunity is considerably higher than the other categories of costs, benefits and market opportunities estimated above. In the residential markets of the 10 MS covered by the Study, the regulatory-induced market for energy efficiency-related construction activities amounts to about €81,800 mln in 2014, of which about 91% (€ 72,900 mln) refer to renovation and € 8,900 bln (9%) to new buildings. However, if only new business opportunities of EU origin are taken into consideration, thus disentangling national policy factors, the effect is lower, though still very considerable. In 2014, the EU regulation-induced market for energy-efficiency related construction activities amounted to almost €26 bln bln, of which €21.3 for renovation, and €4.1 bln for new buildings. This value is largely stable across the 2010-2014 period, varying between €24.3 and €25.8 bln. Compared to the overall size of the market for residential buildings in the 10 MS covered, EU-induced market opportunities account for about 7-8% of the value added at factor cost.

Exhibit 5.8 New Market Opportunities of EU Origin for Construction Companies –

Renovation and New Building Segment, in 10 MS (€ mln)

2010 2011 2012 2013 2014