Construction in Spain: European Funds and Challenges

European funds have been an important source of financing for construction projects in Spain, especially the Next Generation EU funds, which financed 12.3% of the works tendered in 2023, compared to 12% in 2022.

In fact, according to Julián Núñez, president of the employers’ association SEOPAN, the arrival of these funds has led to an exceptional period for construction in the country. Up to November 2023, the tendering of works by public administrations exceeded 25,310 million euros, 1.9% more than the previous year, which had already been a record.

However, despite these positive results, threats to the sector have emerged over time that could negatively impact the execution of projects.

Challenges and threats to the sector

The uncontrolled rise in prices of raw materials such as copper, aluminium and corrugated steel due to Covid-19 has put the execution of projects at risk because public works contracts do not have price review mechanisms. In addition, inflation, which has left 3% of tenders untendered in 2023, adds to the difficulties.

The deadline for tendering works under the European funds closed in December 2023, so the sector declares 2024 as “a transitional year”. Public investment is expected to be maintained, but from 2025, with the end of the European funds, a demand for greater fiscal discipline is foreseen.

Proposals and challenges

Experts and industry representatives, such as SEOPAN, highlight the importance of public-private partnerships, such as concessions, in order to anticipate investments, mobilise private capital and free up public funds for other priorities. In fact, Nuñez mentions that “this formula concentrates the project, construction, financing and operation and maintenance of the infrastructure in the same agent, simplifying the transfer of risks and responsibilities and reducing the average maturity period of our investments”.

Prospects for the future

Despite the challenges, projections to 2024 suggest positive inertia due to the continuation of contracts already awarded. However, the sector anticipates a significant change from 2025 onwards, when budgets could suffer due to the lack of European funds and the European Union’s demand for fiscal discipline.

In this context, public-private partnerships and price reviews in contracts are crucial measures to address these challenges.

Source: LaVanguardia