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Why has renovation become Europe’s most overdue infrastructure trade?
Of all the buildings in the EU, 85% were built before 2000, 75% are energy-inefficient and only 1% are energy-renovated each year. Yet the majority of these will still be standing in 2050. This mismatch between an ageing, underperforming building stock and a tightening rulebook changes the grounds for renovation from a cyclical construction upswing into a consistent, enforceable demand stream.
The European Commission estimates that current energy-efficient building targets require c €275bn of additional renovation investment every year and the annual energy-renovation rate must at least double. The revised Energy Performance of Buildings Directive (EPBD) will convert intent into obligations, with Minimum Energy Performance Standards (MEPS) requiring the worst-performing 16% of non-residential buildings to meet national energy performance thresholds by 2030 and 26% by 2033. Additionally, average primary energy use must be cut by at least 16% by 2030 and 20–22% by 2035, with 55% of that reduction required to be from the worst-performing 43% of homes. As Europe progresses towards net zero by 2050, public funding and regulation are increasingly being directed towards deep, sustainable renovation, reinforcing demand for suppliers whose products deliver measurable improvements in building energy performance.
Why does heating and insulation sit at the front of the renovation queue?
Regulators and property owners reach first for the heating system because it delivers substantial energy savings without requiring major structural intervention. The most discernible change in the heating industry is the move towards electric heat pumps, which are up to 400–500% more energy-efficient than fossil-fuel boilers. The UK, in alignment with the EU’s EPBD, has introduced a new heating-system metric on energy performance certificates (EPCs), which ranks heat pumps above fossil-fuel boilers, and the EPBD gives a deadline of 2040 to phase out fossil-fuel boilers entirely. As a market-leading EU-based heat pump manufacturer, Ariston Group are set to gain heavily from this movement, and, while having struggled with cyclical troughs in recent years, the new EPBD revisions promise a consistent structural upswing, although timing rests on the continuity of incentives.
The successor to the heating system in the natural order of energy-renovation is insulation. Heat pumps cannot function efficiently while a building’s heat loss is high, and replacing or upgrading insulation, which accounts for up to two thirds of heat loss, serves as the most efficient next step. Recticel, having divested bedding and engineered foams, are now focused on smart insulation systems, specialising in the production of high-performance polyurethane (PUR) and polyisocyanurate (PIR) insulation boards across Europe. The EU’s push towards sustainable practices will also benefit eco-focused manufacturers like Steico, whose bio-based wood-fibre insulation is 67% of revenue, commanding a premium in low-carbon, breathable insulation, and their new €75m plant promises an increase in capacity for the coming demand. For buildings where basic insulation alone can’t close the gap to minimum thresholds, external thermal insulation composite systems (ETICS) offer a more powerful alternative. Sto SE are specialised ETICS manufacturers offering versatile systems with the potential to promote a building’s EPC several bands in one intervention, although costs are substantial and lifespan is inferior to most simple insulation replacements.
Where do roofs, walls and windows lie in the retrofit chain?
Tightening a building’s envelope (foundations, exterior walls, roofs and windows) is the heavier, longer-cycle option beyond the heating and insulation quick-fix. Interventions are capital-intensive and slow to deploy but cannot be avoided in the majority of deep energy-renovations required for the worst-performing buildings, which are a priority under the revised EPBD. Alumasc’s spread across water management, building envelope and housebuilding products means it captures deep renovation from more than one angle. It specialises in environmentally sustainable products and systems, and their revenue growth of 14%, despite new builds slowing, proves that sustainable renovation is decoupling from the new build cycle. Similarly, Wienerberger, Europe’s largest brick and roof-tile manufacturer, acquired Terreal to deepen roofing and façade exposure and have been explicit that c 60% of roofing sales now go into renovation. Separately, retrofit windows and doors are some of the most cost-effective structural measures for lifting an EPC rating. Eurocell is the UK’s market-leading PVC window, door and roofline manufacturer, and their 2025 acquisition of Alunet, taking them into aluminium, helped to lift revenue by 13% after a subdued year in 2024.
Why is ventilation and climate control the quiet winner of tighter building envelopes?
As buildings are sealed for efficiency, natural air movement is reduced, and the moisture, condensation and air quality problems that draught proofing used to solve return as evident failures. The EPBD’s indoor environmental quality provisions and national rules make mechanical ventilation with heat recovery (MVHR) system manufacturers a second-order beneficiary, and, as such, market-leaders like Zehnder Group and Systemair will see an influx in demand in the latter stages of EPBD implementation.
In the UK, air conditioning inspection penalties are set to change from negligible to substantial given the Building and Engineering Services Association’s estimate that 95% of UK buildings have systems in breach of energy regulations. Volution Group are uniquely positioned to reap the benefits here as demand shifts towards eco-friendly and energy-efficient ventilation, and, given their 21.7% y-o-y growth in recent half-year results, the group looks well placed to convert the increase in compliance-led demand into volume and margin gains.
What does the renovation bottleneck mean for the wider supply chain?
The EPBD can mandate renovation but cannot mandate the workforce. The EU construction sector employed 13.8 million people in 2024, yet the European Labour Authority has identified severe shortages across plumbers, carpenters, bricklayers and electricians. Cedefop projects construction employment to decline by 1% for the period to 2035. Retrofit work is in general is more skilled than new build, so a shrinking workforce will struggle to deliver rising volumes of more advanced work.
Financing will also continue to pose a challenge. The European Commission’s €275bn-per-year requirement dwarfs current public budgets, meaning the burden falls on landlords and homeowners who lack sufficient capital. The EPBD outlines intent to provide advisory hubs, renovation passports with building-specific plans and financial incentives, but a cost-of-living squeeze means many planned renovations will remain unfunded.
Additionally, the rate at which the worst-performing building stock can be surveyed and specified depends on each EU member state’s transposition, and currently none have fully implemented the EPBD, with some having submitted National Building Renovation Plans and others with no visible implementation progress. The issues lie less in an absence of demand, but more in whether the system can physically and financially absorb it on the strict timeline set by the directive.
Exhibit 1: Net zero by 2050 goals require deep, sustainable renovation
Energy-saving homes, energy efficiency concepts, eco-friendly home improvements, cost savings, low-energy eco-friendly homes, green handshake.
Source: iStock.com/Sansert Sangsakawrat
What does the timeline for the retrofit economy look like?
As of July 2026, 15 of 27 member states have submitted draft National Building Renovation Plans with the other 12 to follow suit by the end of 2026. Deadlines for transposition into national law have already passed, showing clear signs of potential long-term delay, although many countries have made intentions clear, so measurable progress by the 2030 MEPS deadline looks likely, even if full compliance does not. Heat pumps sit earliest on the predictable timeline given explicit attempts to phase out fossil fuel boilers, favourable EPC metrics and attractive lifetime cost-benefit.
Efficient insulation systems are its natural companion since heat pumps only deliver full value once a building’s heat loss is under control, and demand for both industries will likely grow hand-in-hand as we approach residential building deadlines like the required 16% decrease in average primary energy use by 2030. Sustainable structural envelope suppliers will operate on a longer, independent cycle as the EU pushes deep renovation on the worst-performing 16% of non-residential building stock by 2030 and 26% by 2033, and the requirement for all new buildings to be net zero emission by 2050. MVHR manufacturers will likely see a lag of several years before the revised EPBD makes a real impact since no direct mandate forces indoor climate renovation, but no well-insulated building can escape the problems of mould and stale air without MVHR systems, so an increase in demand is sure to follow.
Edison Insight
The mandate is real and dated, but delivery depends on the evolution of the bottleneck the EPBD has caused. Enforcement must become uniform across the EU, but, having already missed the deadline for National Building Renovation Plans, many member states stand to struggle with the strict timeline currently in place, which serves as a reminder that policy timetables and delivery timetables are not the same thing. Execution capacity will also require improvement, but the businesses with the balance sheet to scale production, the capacity to absorb rising levels of skilled work and demand already visible in their order books are the ones most likely to turn the mandate into earnings rather than merely into orders.
Megatrends: Energy transition, climate change, cities of the future, changing nature of work
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