Can the construction industry adapt for the future?

Facing mounting pressures: limited physical space, labour shortages, and environmental and infrastructural constraints demand the reallocation of scarce production factors towards activities that are productive, low in environmental impact, and less reliant on low value-added labour. 

In March 2025 we published a study on 'Future-proofing the Dutch economy'. This report examines fifteen industries as part of the commercial sector, over the period 1995-2023 from three different perspectives: their position in the economy, their economic contribution and their reliance on scarce productive factors.

The industries that are most central, that make a significant contribution to the economy and that also have a limited reliance on scarce productive resources are the industries with the most potential for sustainable growth. Our analysis evaluates the construction industry through three analytical lenses: centrality, economic importance and dependence on scarce production factors. 

Centrality

This lens evaluates the sector’s role in national production flows. The construction industry ranks as the second most central industry. This is not surprising, as the industry is to some degree involved in anything that needs to be built. Due to its centrality, construction plays a crucial role in the function of the economy. While it is linked to all corners of the economy, it has especially close production ties (measured in value added terms) with business services and manufacturing industries. 

Economic Importance

The construction industry is seventh largest in terms of economic size (share of GDP) and labour productivity growth in the Netherlands, but fifth lowest in spending on research and development (R&D). R&D spending is vital not only for innovation within the industry but also for creating productivity-enhancing innovation spillovers for other industries.

Given societal factors including the housing crisis, the energy transition, climate change, ageing Dutch infrastructure, and the need to enhance national defence, the construction sector will play an essential role in the coming decades. It will be fundamental for delivering adequate housing, climate-resilient water management systems, a robust energy grid, safe drinking water, and secure bridges, tunnels, and viaducts. 

Although industry growth faces challenges such as regulatory constraints, grid congestion, labour shortages, modest productivity gains, increasing demand, and a complex macroeconomic context, the construction sector is expected to grow steadily in the coming years. 

Dependence on scarce production factors

Overall, construction performs relatively well in terms of using scarce production factors, ranking fourth (with one being best or lowest use), but challenges remain in labour, capital, emissions and physical space areas. In terms of labour, the industry is the fifth-largest Dutch employer but still struggles with labour shortages, which is a major bottleneck to labour productivity growth. For capital, data from 1995 to 2023 show that capital productivity in the business sector has increased by 32%, while declining by almost 15% over the same period in the construction industry.

Regarding emissions, construction has the eighth-highest greenhouse gas emissions, fourth-largest acid equivalent (nitrogen) emissions and fourth-lowest water use. Hence, sustainability and circularity remain as major trends demanding transformation for construction companies.

Physical space is yet another constraint, with the sector having the third-largest reliance on physical space, as many activities of the construction industry are location-bound and there is not much growth potential in terms of physical space without significant economic restructuring.

To sum up, the construction industry is important to the Dutch economy because of its central role in many production processes and its economic size. However, the industry struggles with low R&D spending, sluggish labour productivity growth and reliance on scarce production factors. The demand for construction services will only grow, and the industry needs to find a way to boost labour productivity growth and achieve its sustainability and circularity ambitions to become future-proof.