European construction set for sharp fall in 2009

European construction output is expected to fall -4,3% in 2009, following a -2,5% drop in 2008, according to the latest figures from Euroconstruct. Moderate growth of +0,4% is expected in 2010, picking up to +2,2% in 2011.

This year's downturn is largely attributable to a sharp -13,4% drop in Spanish construction output, although the much smaller Irish market saw a steeper fall of -20,6%. The other major markets to shrink this year were France (-2,2%), Italy (-3,8%) and the UK (-1,1%), although the effects were partly offset by a +3,1% rise in German construction output.

Elsewhere in Western Europe growth was lacklustre, with The Netherlands topping the table with a +2,4% rise in activity. Overall, construction output in Western Europe shrank -2,9% in 2008 according to Euroconstruct.

It was a different story in Eastern Europe, where construction output rose +6,2% in 2008, despite a -6,5% downturn in Hungary. Poland, the region's largest construction market rose +12,4%, supported by the Slovak republic (+6,0%) and the Czech Republic (+2,2%).

Eastern growth

The growth in Eastern Europe helped to offset the decline in more mature markets. However, overall European construction output still shrank -2,5% in real terms in 2008.

Looking ahead to 2009, Euroconstruct sees the recession deepening, with a further -4,3% fall in output across Europe forecast. In Western Europe the decline is expected to be -4,8%, again with Spain and Ireland being hardest hit.

The Spanish market is expected to drop another -16,4% to €157 billion, compared to a peak of € 217 billion in 2007. Ireland is in for a -16,3% drop to € 25,5 billion, compared to a peak of € 38,5 billion in 2007.

Of the other major markets, France is set for a -1,9% downturn, while German construction will fall just -0,5%. The falls in Italy (-5,0%) and the UK (-3,2%) will be more severe.

2009

In fact, the only markets expected to see rising construction output in 2009 are Portugal (+0,4%), Sweden (+0,2%) and Switzerland (+0,8%), while Austria is expected to be flat. Despite a little growth in Swedish construction output, the previously strong Nordic market is forecast for a sharp dip, with Denmark expected to drop -4,6%, Finland -9,8% and Norway-2,5%.

Growth will remain in Eastern Europe, but at +4,8% it will be well down form the rates of +8,8% and +8,0% seen in 2006 and 2007. Poland is still expected to lead the way, with a +8,0% rise in output, with the Czech Republic (+3,6%) and Slovak Republic (+2,2%) looking more subdued. Hungarian construction output is expected to shrink again, but at a less alarming rate of -3,8%.

Recovery

Looking ahead to 2010, Euroconstruct sees European construction output rising by +0,4%, with a marginal -0,1% decline in the West being offset by robust growth of +9,6% in the Eastern countries. Most markets in Western Europe are expected to grow again in 2010, but continued falls in Finland, Italy, Spain and the Netherlands are expected to keep negative.

In contrast, all four major Eastern markets ware forecast to grow in 2010, with Poland leading the way at +15,3% growth, and the Hungarian market returning with a +1,7% rise after a four-year recession.

The recovery is expected to gather pace in 2011, with the Western Markets growing +1,6% and Eastern Countries rising +10,9% for a +2,2% increase overall.

For more information, visit www.euroconstruct.org.