May 5, 2025

Labour shortages and new documentation requirements call for innovative solutions

The construction industry in Scandinavia is facing an exciting but challenging future. On the one hand, there is strong demand for new construction and renovation work, and public investment in infrastructure – for example in healthcare – is expected to increase as a result of demographic changes. On the other hand, there are significant labour shortages, which is pushing the industry to find new solutions in both the short and long term. In addition, increasingly strict environmental and documentation requirements are in the pipeline from both the EU and national authorities.

Tom Myhre, Sustainability Director at Backe – one of Norway’s largest construction and property development companies – has worked in the construction industry for many years. With his in-depth knowledge of the industry, he points to two major trends that are already shaping everyday life in construction throughout Scandinavia:

“We’re already seeing the emergence of two main trends throughout Europe, including Norway, Sweden and Denmark. First, there is a significant labour shortage, and second, there is an intensive focus on environmental and climate matters,” says Tom Myhre.

Labour shortage being felt on construction sites throughout Scandinavia

Several reports from countries across Europe are currently in the public spotlight as they repeatedly highlight labour shortages in a number of industries. The construction industry has also been hit hard, which is noticeable in Sweden, Denmark and Norway:

“We’re seeing large age groups of skilled workers leaving the labour market, while young people are pursuing careers in other areas. At the same time, until now we’ve been accustomed to foreign labour from countries such as Poland and the Baltic states, but a weak krone and better pay in several European countries has meant that many are travelling elsewhere to find work or return home. Which puts the industry in a difficult situation,” says Tom Myhre.

Moreover, Norway faces challenges related to the use of foreign labour in construction projects. Tom Myhre elaborates: “In Norway, new rules have been introduced for the Oslo region, which mean that it is not permitted to hire labour from employment agencies. A large part of the foreign workforce has left and is not expected to return when construction activity really picks up again.

As an industry, we need to address this issue – for example by looking into alternative solutions such as prefabricated modules. We’re already doing so at Backe, where we’re collaborating with Green Box, a Danish developer and manufacturer of prefabricated bathrooms.”

Environment, climate and new EU requirements

The second major trend is the growing focus on environmental and climate considerations, which is impacting all aspects of construction. The EU’s Green Deal and national climate regulations are playing a particularly important role here.

“When the climate crisis really bites, the EU and national authorities will doubtless respond with further regulation,” says Tom Myhre. As an example, he mentions the new climate requirements for new buildings in Denmark, where the authorities can sanction buildings that fail to meet the CO₂ emission limits. Likewise, Norway is very keen to reduce its CO₂ emissions through choosing the right materials and optimised construction methods, and Sweden is seeing a similar wave of regulation and reporting.

At EU level, there is considerable focus on a Due Diligence Directive (CSDDD), which highlights companies’ responsibilities throughout the supply chain. According to Tom Myhre, this is paving the way for even closer cooperation between contractors and manufacturers.

Furthermore, social sustainability is becoming increasingly important, and in Norway, the so-called Transparency Act (Åpenhetsloven) requires companies to ensure that their value chain does not violate human rights:

“Our responsibility does not stop at the first link in the supply chain. We need to know and be able to document where components come from and whether they have been produced under proper conditions,” says Tom Myhre.

Drone photo of residential construction in progress.

New focus on solutions – in particular on prefabrication

When faced by labour shortages and increasingly strict requirements for environmental and climate documentation, it is crucial to think outside the box. One solution is prefabrication, where, for example, complete bathrooms are mass-produced under controlled conditions in a factory and delivered ready-made to the construction site.

“Prefabricated bathrooms reduce the need for labour at the actual construction site. In addition, prefabrication allows for greater standardisation and more consistent quality. In projects where the carbon footprint is a key focus, prefabricated modules often offer advantages – for example through optimised logistics and reduces waste”

Tom Myhre, Sustainability Director, Backe

Kirsten Sønderskov Andersen, CEO at Green Box, adds: “The construction industry is facing a difficult cocktail, where increasing levels of activity and a shortage of skilled labour – and thus fewer hands in the construction sector – are challenging expected growth in construction in all Nordic markets. One solution to this is the increased use of prefabrication in future construction projects.”

Perspectives towards 2030 – and beyond

Despite a temporary slowdown in construction activity, there are many indications that the Scandinavian market will pick up again from 2025/2026. Figures from the Norwegian market analysis company Prognosesenteret predict moderate growth towards 2035, but not necessarily distributed evenly across housing, commercial construction and infrastructure. At the same time, documentation requirements are becoming stricter by the year, and pressure on the workforce will increase when the next upturn in construction begins.

In Denmark, Prognosecenteret also reports more growth from 2025, as a number of postponed projects will be launched in 2025 and beyond.

In future, Scandinavian construction will have to deal with two major challenges: a shortage of labour and the increasing requirements for environmental and climate documentation. This is precisely why many projects will require new solutions such as prefabricated modules, which can streamline construction processes and contribute to a lower carbon footprint through efficient logistics and reduced material waste. At the same time, the industry must ensure that everything is done responsibly – both socially and environmentally. Assuming this happens, there will be good prospects for meeting the expected construction needs while complying with future requirements from the EU and national authorities.

Sources:

https://commission.europa.eu/news/tackling-labour-and-skills-shortages-eu-2024-03-20_en

https://www.frinet.dk/media/2123/rapport-byggeri-2035-en-foresight-analyse.pdf#:~:text=I%20k%C3%B8lvandet%20p%C3%A5%20befolkningstilv%C3%A6kst%20opst%C3%A5r,for%20at%20bygge%20i%20h%C3%B8jden

https://www.naturvardsverket.se/amnesomraden/klimatomstallningen/omraden/klimatet-och-bygg–och-fastighetssektorn/#:~:text=Bygg,intresse%20f%C3%B6r%20att%20skapa%20aff%C3%A4rsm%C3%B6jligheter

https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal_en

https://commission.europa.eu/business-economy-euro/doing-business-eu/sustainability-due-diligence-responsible-business/corporate-sustainability-due-diligence_en

https://www.forbrukertilsynet.no/vi-jobber-med/apenhetsloven

https://via.ritzau.dk/pressemeddelelse/13998147/nybyggeriet-vender-skuden-i-2025-men-genopretningen-sker-pa-bekostning-af-boligrenoveringer?publisherId=13561801&lang=da

https://dagensbyggeri.dk/byggeri-og-anlaeg/byggeriet-i-europa-gaar-bedre-tider-i-moede/

https://www.ae.dk/analyse/2021-03-danmark-mangler-99000-faglaerte-i-2030

https://blogg.prognosesenteret.no/bygg–og-anleggsmarkedet-henter-seg-gradvis-opp#:~:text=tidligere%20antatt,Gjennomsnittlig

Tom Ivar Myhre

Sustainability Director, Backe

The European Green Deal

The European Green Deal is a comprehensive strategy to make the EU climate-neutral by 2050.
It covers all sectors, from industry and transport to agriculture and construction.
For the construction industry, it means stricter requirements for energy efficiency, material selection and carbon reporting.

Due Diligence Directive (CSDDD)

The Corporate Sustainability Due Diligence Directive (CSDDD) is a new EU directive that requires companies to take responsibility for human rights and the environment throughout their supply chains.
Companies must identify and prevent negative impacts (for example breaches of working conditions or environmental damage).
The legislation entails reporting requirements and potential sanctions for non-compliance.

Norwegian Transparency Act

The Transparency Act requires companies to ensure fundamental human rights in the value chain.
It gives the public the right to gain insights into how companies handle issues such as working conditions and environmental considerations among their suppliers.
The purpose of the act is to promote openness and responsible business conduct.