The Euroconstruct network of European construction forecasters predicts that the market will return to growth in 2014. However, the group’s history over the last three years of consistently revising its forecasts downwards, combined with general economic risk and concerns, means the turnaround is far from certain.
The forecasts unveiled at Euroconstruct’s December 11 – 12 conference in Munich point to a -4.7% decline in European construction activity this year to € 1.27 trillion (US$ 1.65 trillion) across 19 major European markets. This represents a significant downgrade from the prediction of a -2.1% decline for 2012 made at the group’s June meeting in London and the -0.3% fall it forecast a year ago.
For 2013, Euroconstruct is currently forecasting a further -2.5% decline in European construction output, before the market returns to growth with a +1.0% rise in 2014.
However, individuals within the Euroconstruct organisation admit that with the debt crisis in Europe’s peripheral countries showing no sign of resolution, and other global economic concerns, this is an unlikely prospect. Ludwig Dorffmeister of the Ifo Institute, who presented the overall outlook for the European construction sector at the Munich conference, said, “economic developments lead to a change in forecasts and they are changing all the time. The risks are quite significant and I feel that a moderate recovery will not happen before 2015.”
The most distressed construction markets in Europe this year continue to be the debt-ridden peripheral countries. Spain for example is expected to see a -30.8% decline in construction output this year, following falls of -22.4%, -17.6% and -20.1% in 2009, 2010, and 2011. A further fall of -23% is forecast for next year. Portugal and Ireland are also expected to see double-digit declines in construction output this year.
However, there is moderate growth forecast for some key countries. At € 273 billion (US$ 355 million), Germany is Europe’s largest construction market. Following this year’s -0.2% decline, growth is expected to resume in 2013, with a +2.5% increase in output. Low single-digit growth is also forecast next year for Denmark, Norway, Sweden and Switzerland.
Overall though, the Euroconstruct conference was downbeat about the state of the market. “With construction work forecasts to be worth a total of € 1.27 trillion [US$ 1.65 trillion) in 2011 prices for 2013, construction in the 19 (Euroconstruct) member countries should fall just short of the level reached in the mid-1990s. The soaring growth in construction demand seen between 1997 and 22007 has therefore been cancelled out in the six years since 2008.””
In terms of individual sectors, the civil engineering market has been hit hardest this year, with a -7.5% decline, according to Euroconstruct. Markku Riihimäki of Finnish Euroconstruct member, the Technical Research Centre of Finland (VTT) said, “Public financing problems are slowing down civil engineering. The return to the normal level will take time.”
Non-residential construction is set to fall -4.2% this year, while the residential sector will fall -3.5%. Andrea Kunnert of the Austrian Institute of Economic Research (WIFO) said of the housing market, “The Nordic region shows the strongest growth for the near future. But these forecasts have risks and this is closely intertwined with the recovery in the Euro Area.”