Preventing social dumping and unfair competition in Europe’s construction sector EBC calls for investigating the need to limit subcontracting chains

The European Builders Confederation (EBC) proposes four recommendations to address the challenges faced by micro and small construction enterprises (SMEs) due to abuses in subcontracting practices and asks for an exploration by the European Commission of how European legislation could improve prevent social dumpling and unfair competition in the construction sector.

Fraudulent competition, wage exploitation, and social dumping due to long, opaque subcontracting chains are practices that disproportionately affect SMEs, particularly micro-enterprises, which amount to 94% of all construction companies and are thus essential to the sector’s success. When they are not established in a transparent and fair manner, these chains often allow fraudulent companies to avoid local taxes, social security contributions, and regulatory oversight, jeopardizing not only small businesses but also worker safety and project quality. Damaging thus the reputation of the construction sector as a whole.

EBC is calling for an exploratory exercise on the potential of European legislative action to limit the layers of subcontracting in public contracts, with the aim to ensure a level playing field for smaller firms and safeguarding fair competition in the construction sector. Such exercise should be conducted by the European Commission, with the support of relevant actors, such as the European Labour Authority and through inclusive consultation of the relevant construction employers and workers representatives. Especially as these practices are often observed as undermining the financial health of SMEs, threatening their ability to invest in their sustainability transition, digital innovation, and a skilled workforce.The EBC’s paper proposes four policy axes to envisage reforming subcontracting practices. These include:

• Investigate the added value of a dedicated EU legislative vehicle which limits the number of subcontracting levels in construction, focusing on public procurement.

• Empower subcontractors and small construction companies through the efficient application of existing EU legislation.

• Reinforce the framework of mobility in construction by supporting the Posting of Workers Directive (PWD) with the revision of Regulation EC 883/2004 on the coordination of social security systems.
  
• Revise the European Labour Authority’s mandate to provide it with the necessary tools to further monitor compliance with the PWD rules, serve as an inclusive information hub and act as a catalyst for cross-border inspections.

EBC is committed to fostering constructive dialogue with the European Commission, EU institutions, and all relevant stakeholders in the construction sector to ensure fairer subcontracting practices and support the competitiveness of micro companies, craft trades and SMEs.

“To safeguard the integrity of Europe’s construction sector, it’s imperative that we address the complexities of subcontracting chains, which sometimes lead to social dumping and unfair competition. By clarifying the regulatory framework, we can protect our small construction companies, ensure a fair market environment and uphold high quality and safety standards, says EBC President Philip van Nieuwenhuizen. Many small companies operate as subcontractors, higher and lower in the chain, reason why EBC asks for inclusive discussions to address their concerns. This will help secure the industry’s future in line with the EU’s goals for social, economic and environmental sustainability.”