The state of local infrastructure investment in Europe: EIB Municipalities Survey 2022-2023

Investments by municipalities continue to face myriad obstacles, such as a lack of funding, a dearth of the technical skills needed to plan and implement projects, and lengthy and complicated regulatory processes.

Skills are a particularly thorny issue – one that plagues the private and public sectors alike. The Municipal Survey 2022 shows that a significant majority of municipalities report difficulties in finding experts with environmental and climate skills, as well as technical and engineering expertise. These challenges present significant hurdles to municipalities’ investment plans.

More than six in ten municipalities expressed dissatisfaction with their investments in climate mitigation and adaptation over the past three years, while 40% are dissatisfied with their investments in digital infrastructure. Looking forward to the next three years, climate change mitigation, adaptation, and digital infrastructure will be central to municipal investment plans. Addressing the shortage of skills will be crucial to ensuring the success of these investments.

According to the survey, a majority of municipalities (88%) say their investment in infrastructure over the past three years has been inadequate in at least one area. This dissatisfaction has increased slightly compared with the previous survey in 2020, where 83% expressed a similar sentiment.

Notably, municipalities are particularly dissatisfied with their investments in climate mitigation and adaptation, although their discontent waned slightly compared to 2020.

It is worth noting that municipalities in less developed regions (27%) are more likely than municipalities in more developed and transition regions (13%) to say that investments in climate change adaptation were significantly lacking over the last three years.

A significant majority of municipalities (90%) plan to increase infrastructure investments in at least one area in the next three years, a larger share than during the previous survey in 2020 (87%). Investments in climate adaptation and mitigation top the list, as does digital infrastructure.

• Over 60% of municipalities plan to boost investments in climate change mitigation and adaptation in the upcoming three years.
• 63% of municipalities plan to increase investments in digital infrastructure.

Insufficient funding and regulatory hurdles continue to restrain municipal investment. Access to skilled labour and supply chain constraints are also significant barriers.

• 58% of municipalities say that funding is a problem
• 62% of municipalities face a shortage of skilled labour
• 60% encounter difficulties obtaining supplies

Municipalities also face a shortage of experts with environmental and climate assessment skills, which poses a problem for 69% of them. Finding experts with engineering and technical skills is cited as the second-biggest challenge, with 29% of municipalities considering it a major challenge and 33% saying it is a minor challenge.

Municipalities’ financing mix remained largely unchanged from 2020 to 2022. The share of municipalities using their own funds, transfers for project-specific funding and external debt financing remained steady since the previous survey.

Stark differences exist between less-developed and more-developed regions, however. More-developed regions tend to rely more on their own funds, while less-developed regions depend more on transfers.

When looking at investments over the last three years, 18% of EU municipalities said they had tapped external debt financing to fund investment. Among these municipalities, 60% successfully obtained all the debt financing they had sought from external sources.

The success of obtaining financing varies largely between developed and less-developed regions, however. 47% of municipalities in less-developed regions secured all the external financing they sought in the last three years. Developed regions had more luck. 71% of municipalities in developed regions obtained all the external financing they needed, whereas only 57% of transition regions did.

EU municipalities made bigger strides in supporting the digital transformation compared to the climate transition. The share of municipalities defined as being ahead in “green” measures¹ stands at 27%, which is considerably lower than the 45% of municipalities excelling in digitalisation².

The adoption of climate measures, however, varies largely among regions. The share of municipalities that have not implemented any of the green measures mentioned in the survey stands at:

• 43% of municipalities in less developed regions.
• 31% in transition regions.
• 24% in developed regions.

In contrast, the share of municipalities that have not implemented any of the digital measures mentioned in the survey varies less across regions. The share is:

• 19% in less developed regions.
• 14% in transition regions.
• 10% in more developed regions.

Furthermore, the share of municipalities that have made significant progress in both green and digital measures is significantly higher in more developed regions (26%) compared with less developed regions (8%).

1. Green municipalities are defined as municipalities that have already implemented at least three green measures out of the five mentioned in the survey (green budgeting, circular economy, systematic assessment of the energy efficiency of municipality assets, systematic assessment of municipality assets’ resilience to climate change and dedicated staff working on climate change plans.)
2. Digital municipalities are defined as municipalities that have already implemented at least three digital measures out of the five mentioned in the survey (digital integrity/protecting IT systems, providing digital or online government services, systematically assessing the adequacy of the municipality’s digital infrastructure, deploying/using remote sensors and dedicated staff working on digitalisation plans).