The construction industry is known for being cyclical. Its development is closely related to the general condition of the economy. During periods of economic growth, investment in new buildings, infrastructure and other construction projects tends to be abundant. However, in more difficult times, when the economy slows down, construction companies experience a drop in orders and a slowdown. During periods of prosperity, construction companies often take out significant loans for projects. In times of crisis, a decline in orders and difficulties in repaying debt can lead to bankruptcies and financial problems throughout the industry. This in turn affects employees, suppliers and subcontractors.
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As we read on the website of the National Association of the Construction Industry (BNL), which is the largest interest organization of companies and employers in the construction industry in Norway, the ruling parties and SV will start negotiations on the state budget for 2024. Many entrepreneurs find themselves in a difficult market situation and are afraid of losing qualified employees. Nina Solli, managing director of BNL, expressed hope that politicians would take this situation into account during budget negotiations and present it measures aimed at revitalizing the construction sector and stopping significant employee layoffs.
After the government presented its state budget proposal, the National Association of the Construction Industry (BNL) organized many meetings with ministers and central politicians.Last week, Industry Minister Jan Christian Vestre and Labor Minister Tonje Brenna invited the combined construction industry, LO, NHO and Fellesforbundet to dialogue. Several business leaders also shared how grim the market situation is.
Behavior of employed employees
During the meeting with the ministers, the need for immediate action was emphasized in the industry, which is particularly affected by the increase in interest rates and market uncertainty. One of the key steps that the government and parliament should take is to change the rules on layoffs to allow more companies to keep their employees, Solli said.
BNL submitted a request to extend the sick leave period (permitteringsperioden) to 52 weeks and to shorten the employer's period to 5 days. At the same time, dismissed employees should have the opportunity to improve their skills from day one. At the same time, those dismissed should be given the opportunity to improve their skills from the first day.
We will see the effects of the crisis on the new buildings market in the future
Reports of canceled projects, bankruptcies and layoffs arrive almost daily. BNL president and CEO of Backe Gruppen, Eirik Gjelsvik, warned that we will see the greatest effects of the sharp decline in the new construction market in the future.
Construction is a sector susceptible to business cycles. Solli emphasizes the need for actions aimed at revitalizing the industry already in 2024. It also points to the need to strengthen the Housing Bank (Husbanken) and to invest in housing purposes such as student housing, housing for refugees and care housing. In addition, energy efficiency should be stimulated, both in commercial buildings and households.
Stabilizing interest rates and starting to reduce them
During the national meeting, Industry Minister Jan Christian Vestre emphasized that the construction industry should not bear the burden of cooling the Norwegian economy alone. “Nobody expected such layoffs in the construction industry,” he said.
The most important thing for the construction industry is to stabilize interest rates and start reducing them. To remedy this situation to some extent, it is necessary to introduce measures in the state budget for 2024 that will help revive the market.
BNL points to five principles that should guide actions:
- Actions with quick results from next year's budget.
- Projects and activities of shorter duration.
- Activities tailored to current and future social needs.
- Activities that help you preserve workplaces and avoid significant price increases once the market stabilizes.
- A realistic level of ambition that does not exceed the actual needs of the industry and does not place undue pressure on the Norwegian economy.
A crisis in the construction industry is usually closely monitored by the government and financial institutions because it has a significant impact on the overall stability of the economy. Therefore, taking action to support this industry in difficult times can help prevent further economic disruption and protect jobs.
Source: National Construction Industry Association
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