Leading France-based contractors like Vinci, Bouygues, and Eiffage are adapting to a rapidly evolving landscape 鈥� one marked by rising material costs, labour shortages, and stringent environmental regulations. At the same time, digital transformation and government-backed green initiatives are opening up new opportunities.

A sharp downturn

The environment in which the sector is having to adapt to all these changes is a tough one. 

A recent survey of construction buyers in the country pointed to a sharp downturn across France鈥檚 construction sector, with the residential sub-sector the biggest drag on activity levels.

The headline Hamburg Commercial Bank (HCOB) France Construction PMI Total Activity Index, which measures month-on-month changes in total industry activity, stood at 43.8 in March 2025 (where anything less than 50.0 indicates a contraction).

Worryingly, buyers continued to report a lack of incoming new work in the latest survey 鈥� a problem that has been the case for exactly three years now.

Survey respondents reported a hesitancy among clients to commit to new projects, customer budget uncertainty, and unfavourable economic conditions among the reasons firms linked to the latest reduction in new business.

Incentives for the industry

While sustainability and modernisation are at the forefront of industry discussions, there are also concerns that financial support for residential construction projects has been diminishing, according to the F茅d茅ration 贵谤补苍莽补颈蝉e du B芒timent (FFB), which represents more than 50,000 building companies throughout France.

鈥淪ince 2017, government incentives and support for housing have been steadily reduced,鈥� says Lo茂c Chapeaux, the FFB鈥檚 director of economic, financial and international affairs, adding that the lack of support is creating a difficult environment for the construction industry.

New office and apartment buildings under construction in the Euratlantique district in Bordeaux, France (Image: JeanLuc Ichard via AdobeStock - stock.adobe.com)

At the same time, stricter environmental regulations, such as RE2020 and 鈥榋茅ro Artificialisation Nette,鈥� have added layers of complexity and cost to new projects. While these policies 鈥� imposing strict carbon emissions limits and encouraging measures like heat pumps, solar power, and higher standards of insulation 鈥� push greener construction in France, they have also contributed to rising expenses and slowed development. The effects of these changes, coupled with inflation, increased material costs, and higher interest rates, have placed immense financial pressure on the sector.

鈥淔rom 2022 to 2025, we estimate the construction industry鈥檚 turnover will fall by almost 10%. The hardest-hit sector is new housing, with a projected collapse of 28%, and non-residential construction down by more than 12%,鈥� adds Chapeaux.

With fewer new projects breaking ground and increasing financial strain on developers, the downturn the industry faces is one of its most severe in decades.

The FFB is negotiating with the government and parliament in an attempt to gain more incentives and further support going into 2026.

Dr Tariq Kamal Chaudhry, economist at Hamburg Commercial Bank, adds, 鈥淭he French government would need to take several measures to stabilise the construction sector. Firstly, state support programs for energy-efficient renovations and sustainable construction could be expanded. Secondly, the government could increase investments in infrastructure projects to boost demand in the construction sector.鈥�

Tax and fiscal changes

Then there鈥檚 the prospect of heftier tax bills for companies operating in the sector. In October 2024, the French government unveiled the Finance Bill for 2025, introducing several tax measures aimed at reducing the national budget deficit. Among these is a temporary surtax on corporate income tax targeting large companies with significant profits. This measure is designed to generate additional revenue from sectors that have demonstrated robust financial performance.

The construction industry, particularly its major players, is significantly impacted by this proposal. For instance, Eiffage, a leading French construction and concessions company, estimated that if the proposed tax surcharge had been implemented in 2023, it would have resulted in an additional tax liability of 鈧�135 million, reported news agency Reuters.

Similarly, Vinci, another major firm in the sector, projected an increase of approximately 鈧�400 million in its 2024 taxes due to the proposed bill.

The National Federation of Public Works (FNTP) represents over 8,000 public works companies across France. It has expressed serious concern over these proposed measures, stating that it is 鈥渁larmed by the measures announced by the government as part of the draft finance bill for 2025.鈥� 

In response to the finance bill, the FNTP warned that 鈥渢he choices made would have a recessive effect on the French economy and, contrary to the stated ambitions, would only allow the public deficit to be stabilised.鈥� The federation argues that the tax increases would stifle economic growth rather than encourage it, exacerbating territorial inequalities and hindering much-needed investment in infrastructure.

Infrastructure investments

Despite the challenges that regulation and the political landscape throw at the industry, the state continues to prioritise large-scale infrastructure projects.

The Grand Paris Express is Europe鈥檚 largest urban transport project, aimed at transforming the Greater Paris region with 200km of new automated metro lines and 68 new stations. Designed to improve mobility and reduce congestion, the project is expected to cost around 鈧�42 billion and be fully completed by 2035.

Liebherr cranes working on the Grand Paris Express transport project in France (Photo: Liebherr)

The Soci茅t茅 des Grands Projets has announced an updated timeline for the commissioning of key metro lines within the Grand Paris Express. Line 15 South is now scheduled to open in the fourth quarter of 2026. Due to the integration of a shared automated control system across multiple lines, the opening of Lines 16 and 17 has been pushed back, with their first sections now expected to be operational by the second quarter of 2027.

Despite these adjustments, the overall schedule for the later sections of Lines 15, 16, and 17 remains unchanged. Additionally, Line 18, which operates independently from the affected lines, remains on track, with its commissioning date confirmed as planned.

In a press release from Soci茅t茅 des Grands Projets, Jean-Fran莽ois Monteil, chairman of the executive board, reaffirmed the commitment to delivering a high-performance transport system, stating, 鈥淭he revision of the schedule has provided a better understanding of the challenges involved in transitioning from the civil engineering and development phase to the transport systems installation and testing phase.鈥�

Other major French infrastructure projects face a less certain future. President Macron announced a plan in 2022 for state-owned energy company EDF to build six new European pressurised nuclear reactors at a cost of 鈧�67.4 billion. But a report from France鈥檚 top audit body in January this year warned that the country is 鈥渇ar from ready鈥� to build them, as costs mount. Construction should start in 2027 but there is still uncertainty around funding. 

And in February this year, a French court suspended the construction of the A69 motorway linking Toulouse and Castres amid concerns about environmental damage. Some 鈧�300-450 million had already been spent on the 53km-long stretch of road before the administrative court of Toulouse ordered further work to halt, ruling that the benefits of the project for local inhabitants are 鈥渧ery limited鈥�.

The FNTP鈥檚 president Alain Grizaud has called for more support for infrastructure projects from the government and judiciary. 鈥淔rance suffers from gaping territorial divides. Millions of French people live in isolated areas, far from major roads, with dilapidated or nonexistent infrastructure. Infrastructure is a concrete response to these divides, and its implementation can no longer be left to the mercy of paralyzing legalism and systematic opposition,鈥� he warned.

Significant moves among France鈥檚 construction equipment manufacturers

Mecalac 12 series MTX wheeled loader (Photo: Mecalac)

Meanwhile, in a significant move within the French construction sector, Fayat Group has signed an agreement to acquire Mecalac Group, a manufacturer of compact and mid-sized construction machinery. The deal, which remains subject to regulatory approval, is expected to be finalised by mid-2025.

Mecalac, headquartered in France, produces excavators, dumpers, backhoe loaders, and compaction equipment, with a presence in 85 countries and production sites in France, the UK, Germany, and Turkey. In 2023, it reported 鈧�350 million in sales, delivering around 5,000 machines annually.

Fayat, which specialises in road construction and maintenance equipment through brands like Bomag, Marini, and Dynapac, generated 鈧�5.7 billion in revenue in 2024. The acquisition marks a diversification beyond its traditional road-focused portfolio.

Chris Sleight, managing director of Off-Highway Research said, 鈥淔ayat Group鈥檚 acquisition of Mecalac is a significant merger. I am a little surprised that after decades of tight focus on the road building and road maintenance equipment segments that Fayat is moving into other areas.

鈥淥n the one hand, this will expose it to new customers and markets, but I also wonder whether the lack of cross-over between the two companies, their product ranges and distribution networks will also mean limited opportunities for synergies and savings.鈥�

The French construction industry is undergoing significant transformation due to economic pressures, regulatory demands, and sustainability initiatives. While challenges such as labour shortages and rising costs persist, investment in infrastructure and green technology presents growth opportunities. Looking ahead, firms that embrace digitalisation and environmentally friendly practices will be best positioned to thrive in the evolving market.