European construction to dip this year

By Chris Sleight24 July 2008

According to Euroconstruct's mid-year report, construction output in Europe this year will contract -0,3% to € 1513 billion. The group, which is comprised economic forecasting companies expects a return to growth in 2009, with a +0,2% increase in output, followed by a +1,6% expansion in 2010.

The Euroconstruct forecast covers 19 countries - Austria, Belgium, the Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, the Netherlands and the UK. Of these only five are expected to see a fall in construction activity this year, but with weak growth in most of Western Europe, this will be enough for an overall contraction.

The markets set to contract this year include some of the most consistently strong performers over recent years - Ireland, Spain and the UK. Notwithstanding this, Euroconstruct's figures point towards a genuine crash in Irish construction, with a -17,7% contraction expected this year.

Spain is also looking at a steep fall, with a -5,9% contraction, while the UK mark will only just dip into the red, with a -0,5% drop in output. The other markets expected to shrink this year are Denmark (-0,7%) and Italy (-2,1%).

On the positive side, construction output is expected to increase everywhere else in Europe this year, albeit at fairly tame rates of growth. In Western Europe the most promising countries are Finland, Sweden and the Netherlands, where +3,0%, +3,4% and +3,1% growth are expected respectively.

Overall the western European construction sector is expected to see a -0,8% contraction in 2008. Although only a handful of countries will see output fall this year, they include three of the ‘Big Five' in the shape of Italy, Spain and the UK.

Growth in Europe's other two major markets, Germany and France is expected to hit just +1,5% and +1,2% respectively - not enough to redress the balance.

Eastern boom

But while Western Europe looks weak, growth in Eastern Europe is expected to accelerate this year. Euroconstruct's forecast is for a massive +9,7% increase in construction across the Czech Republic, Hungary, Poland and the Slovak Republic this year, up sharply from 2007's +7,5% rise.

Most striking is Poland, where Euroconstruct expects a third straight year of double-digit growth, with construction output forecast to rise another +14,6% this year to € 40 billion.

But although Europe's four largest emerging construction markets are showing strong growth, their total size this year will be just € 76,8 billion, compared to the € 1436 billion construction output in Western Europe. As a result, the high growth in Eastern Europe will only partly offset the lacklustre Western European markets.
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