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EQ13. What is the added value of action at EU level, especially for SME?

EQ14. What would have happened to the construction sector if the selected EU acts or some of their specific provisions were to be removed and/or handled at MS level? The pieces of legislation in the scope of the analysis generate EU added value in case their objectives are better achieved at Union level compared to e.g. national or local policies. In this respect, the analysis of these EQ builds upon the effectiveness and efficiency criteria discussed above with regard to the extent to which EU rules can promote a sustainable and competitive construction sector in a cost-efficient way. In the following paragraphs, the EU added value is assessed mainly qualitatively, and focusing on the attribution of regulatory benefits, cost savings and costs to the EU rather than national level and the calculation of the share of the costs which is independent from the regulatory framework (the BAU factor) In this respect, two clarifications are necessary: (i) the analysis below is centred on the EU added value delivered to the construction sector rather than to the EU economy as a whole; and (ii) the assessment of the EU added value relies on a series of assumptions that were extensively discussed in Section 3 and Annex III.

Internal Market policy area

All costs and cost savings stemming from the CPR are of EU origin, but not entirely additional when compared to the BAU activity. Most importantly, while regulatory costs would not entirely disappear in the absence of EU provisions, CPR benefits (in particular the additional trade flows and thus lower prices and better quality for customers; harmonisation of requirements for multinational and cross-border companies; simplifications, especially for SME) would be substantially reduced by a piecemeal national approach to the assessment and declaration of performance of construction products. More in detail:

1. the full attribution of regulatory costs and cost savings to the EU framework is explained by the fact that the current legal framework is based on a regulation rather than a directive, and an opt-out clause no longer exists for MS intending not to impose CE marking obligations;

2. the calculation of the share of BAU activities is based on the content of the DOP and CE marking, conveying commercial information that companies would have, at least partly, provided to their clients even in the absence of any legal obligation; and

3. national and local rules would remain even without an EU framework because building regulations largely rely on ‘construction product specifications’, which in turn require some kind of performance declaration.

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

140 When it comes to the administrative costs linked to the provision of the DOP and CE marking, the BAU factor is estimated at 40%. As regards the substantive costs linked to the obligation to put in place factory production controls and perform AVCP, all companies reported that the majority of such costs would be incurred in any case. As manufacturers care about the quality of their products and perform testing and other quality management processes on an ongoing basis, the BAU factor is estimated at 100%. Differently, Internal Market benefits could not be estimated for two reasons. First, the EU framework has been in place since 1989 and information on alternative scenarios could not be retrieved by companies. Secondly, stakeholders did not consider the CPR among the main factors for cross-border trade because of the limited tradability of most construction products. Interestingly, this does not mean that the CPR does not generate any benefits. On the contrary, the benefits in terms of costs savings stemming from a single EU regulatory framework are entirely attributable to the CPR and would not be achieved otherwise. Importantly, these benefits accrue mainly to companies operating in several MS rather than to SME serving local markets.

The PQD is a ‘typical’ EU act providing for mechanisms regulating the cross-border flows of people and goods. The cross-border effects and spill-overs lead to conclude that the EU action generates benefits that MS would not achieve on their own, or with higher coordination costs. For this reason, the new market opportunities generated by the PQD are considered fully of EU origin. Importantly, the estimate of PQD benefits may not fully capture the EU added value generated by cross-border flows of construction professionals and craftsmen, because they did not consider workers going abroad on the grounds of other EU provisions (e.g. the SD or the Posting of Workers Directive), working with local partners, or as employees. In the same vein, the administrative burdens linked to the PQD mechanisms, which are very low compared to the mobility added value, are also fully of EU origin. In summary, the effective reduction of regulatory barriers in the field of construction professions can only be achieved via an EU action, explaining the EU added value of the PQD. The attribution of benefits to the SD is quite difficult, as these effects are limited to a small number of MS and largely overlap the impacts of other EU policies targeted at cross-border operators or national actions targeted at improving the regulatory environment. In this respect, the stakeholders’ opinions did not provide a clearer picture. For instance, some governments argued that specific simplifications were made as a result of the implementation of the SD; other governments pointed out that the SD is a more horizontal piece of legislation with a limited role for the construction sector. Construction operators were generally unable to find a direct relation between the simplification of national or local regulatory frameworks and the SD. In the few cases where some benefits were identified and attributed to the SD, stakeholders were not able to quantify them. Also with respect to the Internal Market aspects and impacts on cross-border construction activities, attributing e benefits to the SD is rather difficult, as the mobility of construction companies is still limited by several other factors (e.g. labour intensity, complexity of the supply chain, knowledge of the local market, etc.). The limited mobility is particularly relevant to SME (expect those operating in niche markets), generally operating in a small are (within some 50km) and not having enough capacity (including financial and human) to offer ‘all- inclusive’ building services to foreign consumers and handle large projects that are worth the effort of going abroad. All in all, in light of a partial implementation, the EU added value of the SD for the construction sector seems to be still limited.

The EU added value of the LPD for the construction sector varies from country to country. In some MS (such as Italy), this Directive, jointly with other EU actions, was a breakthrough to combat late payments in the construction value chain. In some other countries (such as German, Spain and the UK), the LPD played a more limited part as decreasing trends in payment duration had already been registered before the enactment of this piece of legislation. Finally, the picture is more mixed in Belgium and France, where the LPD reinforced the impact of national actions. Based on this fragmented picture at MS level the conclusion can be drawn that in the absence of this Directive some MS would not be able to contain payment duration; on the contrary, some other EU countries would effectively ensure timely payment via national measures. Interestingly, SME, generally having a weaker bargaining position, are the operators benefiting the most from an EU action reducing payment time. Nonetheless, in this context, stakeholders (including SME) are less

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

141 optimistic and estimate a limited role for the LPD in combating late payments in the sector. Energy efficiency policy area

As regards the pieces of legislation included the energy efficiency area, the EE-related market generated by the provisions of the EPBD and EED clearly features an EU added value. Providing an accurate estimate is difficult, as MS retained a large degree of autonomy in e.g. setting and tightening EPB requirements, devising national strategies for the renovation of buildings, and deploying financial measures supporting such strategies as well as the market uptake of EPB requirements. Against this background, the assessment of the EU attribution has to rely on qualitative assumptions and, more importantly, account for national specificities. As a result, EU legislation is considered as generating 31% of the total EE market in the ten MS covered by this assignment, with a greater role for the new building segment (41%), and smaller for renovation (30%), with national support programmes playing a more important part. This share of the EE market accounts for 5% of the entire market for the construction of buildings, i.e. some 7% of the renovation market and less than 2% of the market for new buildings. As mentioned, the EU added value of energy efficiency legislation delivered benefits to all links of the construction value chain, which is dominated by SME. Furthermore, EPB requirements affected also a share of manufacturers of construction products and had a high degree of additionality (and thus a low BAU factor) compared to the business-as-usual market demand. Nonetheless, the added value of EU energy efficiency measures is unevenly distributed across MS, implying that the removal of EU actions in this field would generate marginal impacts in some EU countries (e.g. Belgium, Denmark, France, Germany and UK) where national measures would deliver comparable benefits. In other MS (e.g. Italy, Poland, Romania and Spain), differently, the absence of EU rules would impinge on the functioning of the EE market in the construction sector.

When it comes to the administrative burdens generated by the EPC system under the EPBD and new business opportunities for professionals issuing these certificates, the share of the costs and benefits attributable to the EU level is equal to 100% in the majority of EU countries. The only exceptions are Denmark and Germany, which had already introduced some forms of certification schemes before the enactment of the EPBD. On the contrary, the EU added value, as well as the effectiveness, of the recommendations included in EPC for the construction sector is deemed very limited by both stakeholders and secondary sources.

With regard to other energy efficiency measures, a potential EU added value is generated by the provision requiring MS to renovate at least 3% of central government buildings (art. 5 EED), as the BAU energy-efficiency renovation rate is only 1.7%. Hence, if applied by all MS, this provision would trigger the additional renovation of 1.3% of central government buildings per year. The obligations for energy traders and distributors established by article 7 of the EED may represent a source of additional business opportunities for construction companies, especially for SME providing small-scale interventions to residential customers. Nevertheless, these benefits can only be partially attributed to the EU level as requirements for energy traders and distributors were already in force in some MS before the enactment of the EED. In addition, the actual effects largely depend on implementation modalities, which are entirely left to MS. In the same vein, a large degree of autonomy is left to MS when it comes to the accreditation and certification of inspectors of building systems (EPBD) and of RES installers (RESD). As a result, the EU added value of both schemes in terms of skill enhancement, business opportunities and cost savings is rather difficult to assess.

Finally, as a very limited portion of construction related products were covered by the EDD and ELD, the EU added value of these two pieces of legislation for the construction sector cannot be evaluated.

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

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Concluding remarks – EU Added Value

The added value of actions at EU level for the pieces of legislation included in the Internal Market area appears appreciable. A clear case for EU added value was found for the CPR and the PQD. The EU added value varies across MS with respect to the LPD and is limited in the case of the SD. While the objectives of the CPR, the PQD and the SD by their very nature can be achieved only via EU actions, the actual attribution of benefits or cost savings to the EU government tier is complex as some Directives were still poorly implemented, the tradability of construction products and the mobility of construction services and professionals were still quite limited and encountered obstacles other than the regulatory, and the impacts of these pieces of legislation largely overlapped with other EU and national rules. Interestingly, an important share of the EU added value for the construction sector can stem also from the synergies among these three acts insofar as they facilitate the cross border mobility of all the actors of the construction value chain. With respect to the LPD, while its objectives could be achieved also via national rules, this Directive can have a major role in levelling the playing field across the EU and fostering a pan-European culture for timely payment.

The EPBD and the EED contributed to create an EE market for both new buildings and renovations. In this respect, the EU added value of energy efficiency legislation seems to be more prominent (although unevenly distributed across MS) and deliver quantifiable benefits at all links of the construction value chain that would not have been achieved in the absence of EU actions. Importantly, the EU added value is the result of reinforcing effects between these Directives. Although the value of EU actions related to the EPC (which seems to be confined to opportunities for professionals issuing certificates) and to other energy efficiency measures (whose attribution to EU rules is unclear) is more limited, the overall EU added value for the constructions sector of the energy efficiency legislation can be assessed as medium.

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

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6. CONCLUSIONS