News Report: International growth for European contractors

European contractors achieved revenues of € 167.6 billion (US$ 229 billion) outside their domestic markets last year, according to a survey of 169 companies by European International Contractors (EIC), a trade association representing internationally active European construction companies. The figure was a +7.2% increase on the value of work in 2011 – € 156.4 billion (US$ 214 billion).

The biggest market for these companies is other European countries, with € 75 billion (US$ 103 billion) of work carried out last year. However, this was only a +1.2% increase on the previous year. The rise in overall revenues for European contractors last year came from more robust increases in Asia and North America, helped by gains in other territories. The only region where revenues fell in 2012 was the
Middle East.

In percentage terms, the steepest growth was in North America, with the value of work done rising +26.8% to € 26 billion (US$ 35 billion). However, the markets of Asia & Oceania were more significant, and their +12.6% rise took the value of work done to € 31 billion (US$ 42 billion).

Elsewhere, turnover in Latin America was up +14.4% to € 11 billion (US$15 billion), while there was a rise of +8.4% in Africa to € 15 billion (US$ 20 billion). Meanwhile in the Middle East, the value of work fell -9.7% to € 10 billion (US$ 14 billion).

The decline in revenues from the Middle East and the growth in Latin America last year meant it was the first time in a decade that the Latin American market was worth more to European contractors than the value of work done in the Middle East.

Meanwhile, after an improvement in 2011, the proportion
of work carried out in other European markets by foregin European contractors was at a record low. Although the value of € 75 billion (US$ 103 billion) was the highest ever, it represented just under 45% of overseas revenues for European contractors. Last year that figure stood at 47.5% and at the peak in 2005 it was 54.7%.

The intervening years have seen the various emerging markets around the world grow in importance. This is underlined by the Asia/Oceania region, which last year accounted for 18.3% of European international construction revenues – a record in terms of its proportion and the total value of € 31 billion (US$ 42 billion).

But the rise in North American revenues meant the split between revenues earned in developed and emerging markets stayed fairly static year-on-year. In fact since 2010, there has been a stable 60:40 split between the rich countries in Europe and North America and other parts of the world. In absolute terms, 2012 saw European contractors earn € 101 billion (US$ 138 billion) of their international revenues in North America and other European markets, with € 67 billion (US$ 91 billion) of work done in emerging markets.

Although this split has been unchanged for three years, there has been a marked shift over the last decade, with more and more work being carried out by European contractors in emerging markets. A decade ago, only about 25% of international work was in these countries. Over the last ten years the cross-border construction market has grown and that proportion has also increased, with the effect that the value of work carried out in emerging markets has tripled, from € 22 billion (US$ 30 billion) in 2002 to € 67 billion (US$ 91 billion) in 2012.

New contracts

The EIC also collects data on the value of new contracts awarded, although it says that this figure includes some estimates. Some € 179 billion (US$ 245 billion) of new business was signed last year, a +6% increase on 2011.

Some of the trends for new contracts follow those for the value of work carried out last year. For example, there was a +31.6% increase in new business from North America, taking the total to € 28 billion (US$ 39 billion). Similarly, the rise in the value of new contracts signed for work in Asia and Oceania was up +18.1% to € 34 billion (US$ 47 billion).

However, the European market was disappointing. While the value of work done last year saw a marginal +1.2% improvement, the value of new contracts signed fell -5.1% to € 73 billion (US$ 100 billion).

And there were other regions where there was an even greater disparity among work done and new contracts signed last year. In the Latin America the value of work done was up +14.4% last year. However, the value of new business took a steep dive of -17.1%, down to € 13 billion (US$ 18 billion).

On a more positive note, while the value of work done in the Middle East was down last year, there was a boom in new contracts being signed, with a +36.8% rise in their value to € 16 billion (US$ 22 billion).

It can be a mistake to read too much into what the trend for new contracts means for the value of work done in future years. For example, in 2011, the value of new contracts was more or less level with 2010 at € 169 billion (US$ 231 billion). However, that did not stop the value of work done the following year, rising by a useful +7.2%.
However, the fact remains that the estimated total new contracts figure of € 179 billion (US$ 245 billion) this year is a record for European contractors, and should be indicative of growth in work done in years to come.

Who’s winning?

In terms of which country’s contractors are most active overseas, the picture is an increasingly complex one. Ten years ago, French, German and Swedish contractors claimed about a quarter of the total European International revenues each, with various companies from other countries making up the final 25%.

Today French and German contractors are still big players, but their shares have dropped to about 18% of the total revenues each. Swedish companies now claim less than 10% and they have been overtaken by the Turkish and Spanish national groups.

This change in emphasis is also apparent from new contracts data, which also underlines the emergence of Austria’s major construction groups on the world stage.