European construction firms face a tighter operating environment that could translate into additional margin upside, according to a report by ING Research. The bank highlights labour shortages and stronger demand as key forces that are reducing available capacity and improving contractors’ ability to pass higher costs through to customers.
ING points to the sector’s gross operating surplus - a measure of value added after accounting for labour and intermediate inputs - as having been broadly stable since 2008 despite cyclical swings and episodic cost shocks. The lender noted that the disruption to margins during the 2022 energy crisis was short-lived rather than structural.
Data compiled by ING Wholesale Banking and Capital IQ show that EBITDA margins across 30 large European construction companies averaged 5.9% in 2018 and rose to 7.1% in 2024. Those margins remain under the 8.5% average recorded in the 2007-2012 period.
ING said that if energy prices stay moderate despite geopolitical tensions in the Middle East, the combination of rising activity and tighter capacity should support further profit improvements.
Labour availability is a significant constraint. Eurostat survey data cited by ING indicate that at the start of 2026, 27% of European contractors reported staff shortages that were limiting output. ING’s region-level undercapacity gauge points to the most acute shortages in Portugal and the Netherlands, while Finland and Spain continue to display overcapacity conditions.
Cost trends have also changed the profitability calculus for residential projects. Since 2015, building material and wage costs for new residential construction across six European Union countries have climbed by more than 40%, according to Eurostat and ING figures. Contractors have raised sales prices by an even larger amount over the same period, which has helped residential margins to tick up modestly.
Input-cost trajectories have been uneven across markets. The Netherlands has seen more pronounced increases in input costs compared with Finland over the past decade, placing added pressure on firms operating in the Dutch market to safeguard margins.
Large contractors are responding to market dynamics by being more selective about the work they bid for. ING highlights comments from BAM, Vinci and Eiffage that they are avoiding higher-risk and fixed-price mega-projects. The report also notes that Skanska and Strabag posted higher profit margins in 2025.
Still, ING stresses constraints on how far margins can expand. Higher input costs continue to offset some pricing gains, the construction market remains fragmented, and fixed government budgets limit the overall volume of public-sector projects as construction prices rise.
Finally, ING does not expect a recurrence of the exceptional spikes in building material prices seen in 2022 and 2023. Instead, the bank anticipates that rising construction volumes will deepen capacity constraints and give contractors more latitude to prioritise higher-margin work.
Clear summary: ING Research finds that labour shortages and stronger demand are tightening capacity across European construction, supporting further margin improvement by enabling contractors to pass through costs. However, elevated input costs, market fragmentation and fixed public budgets will limit the pace and scale of gains.